THE  SECOND  BANK  OF  THE 
UNITED  STATES 


BY 

RALPH  C.  H.  CATTERALL 


THE  UNIVERSITY  OF  CHICAGO  PRESS 


The  University  of  Chicago  Press,  Chicago  37 
The  University  of  Toronto  Press,  Toronto  5,  Canada 

Copyright  1902  by  The  University  of  Chicago 

New  Impression  1960 
Printed  in  the  United  States  of  America 


CS? 


PREFACE 

IN  this  book  an  effort  has  been  made  to  write  the  history 
of  the  Second  Bank  of  the  United  States  in  its  various 
aspects,  laying  particular  stress,  however,  upon  its  relations 
to  politics,  and  upon  its  operations  as  a  commercial  bank. 

My  thanks  are  due  to  the  Honorable  Craig  Biddle,  of 
Philadelphia,  the  distinguished  head  of  a  distinguished  family, 
whose  members  for  over  a  century  and  a  quarter  have  won 
honor  in  the  annals  of  our  country  as  seamen  and  soldiers, 
jurists,  bankers,  and  historians.  With  a  generosity  as  rare 
as  it  is  grateful  he  has  permitted  free  and  complete  access 
to  the  papers  of  his  father,  Nicholas  Biddle,  which  still 
exist  in  their  entirety  at  his  summer  home  in  Andalusia, 
Pennsylvania.  Without  this  courtesy  much  of  this  history 
of  the  Bank  of  the  United  States  could  not  have  been  written. 

I  wish  also  to  thank  Professor  J.  Franklin  Jameson  for 

his  aid  and  encouragement. 

R.  C.  H.  C. 

CHICAGO,  August  29, 1902. 


ABBREVIATIONS 

B.  P.:  Biddle  Papers.  The  manuscript  correspondence  of 
Nicholas  Biddle,  preserved  at  Andalusia,  Pa. 

Ex.  Doc. :  Executive  Document. 

F. :  State  Papers,  folio  edition.    Finance. 

H.  R. :  House  Report. 

P.  L.  B. :  President's  Letter  Book.  The  letter  books  of  Presi- 
dent Nicholas  Biddle,  kept  at  Andalusia,  Pa. 

S.  D. :  Senate  Document. 


TABLE  OF  CONTENTS 

CHAPTEB            I.    Establishment  of  the  Bank  1 

CHAPTER          II.    The  Administration  of  William  Jones        -  22 

CHAPTER        III.    The  Attempt  to  Save  the  Bank  under  Jones  51 

CHAPTER         IV.    The  Administration  of  Langdon  Cheves    -  68 

CHAPTER           V.    Nicholas  Biddle  and  His  Policy,  1823-28  -  93 

CHAPTER         VI.    The  Branch  Drafts     -  114 

CHAPTER       VII.    The  Results  of  Biddle's  System  132 

CHAPTER      VIII.    The  Bank  and  the  Democracy    -                 -  164 

CHAPTER         IX.    Attempts  to  Secure  Jackson's  Assent  to  a 

Re-Charter    -  186 

CHAPTER           X.    The  Struggle  for  the  Charter  215 

CHAPTER         XI.    The  Charges  against  the  Bank  -                 -  243 

CHAPTER       XII.    The  War  on  the  Bank  285 

CHAPTER      XIII.    The  Contraction  and  Panic  of  1833-34  314 

CHAPTER      XIV.    The  Defeat  of  the  Bank     -  332 

CHAPTER        XV.    The  Last  Days  of  the  Bank       -  359 

CHAPTER      XVI.    The  Branches  and  Their  Administration    -  376 

CHAPTER    XVII.    The  Issues  of  the  Bank      -  404 

CHAPTER  XVIII.    The  Bank,  the  State  Banks,  and  the  Cur- 
rency     -        -                                          -  430 

CHAPTER      XIX.    The  Bank  as  a  Government  Agency  -        -  453 
APPENDICES  — 

APPENDIX         I.    The  Charter  -        -                                         -  479 

APPENDIX       II.    The  Agreement  with  the  State  Banks,  Feb- 
ruary 1, 1817      -        -  488 

APPENDIX     III.    Rules  and  Regulations  of  the  Bank  of  the 

United  States    ------  490 


TABLE  OP  CONTENTS 


APPENDIX      IV.  The  Bill  to  Re-Charter  the  Bank  in  1832    -  498 

APPENDIX        V.  General  Statement  of  the  Bank,  1817-36    -  501 

APPENDIX      VI.  Annual  Totals  of  Inland  Bills  of  Exchange  505 

APPENDIX    VII.  The  Rates  of  Exchange  505 

APPENDIX  VIII.  Exchange  Transactions  507 

APPENDIX      IX.  Distribution  of  the  Bank's  Stock  508 

APPENDIX        X.  Rules  and  Regulations  for  the  Offices  509 

APPENDIX      XI.  Prices  of  Branch  Notes  at  Philadelphia  511 

APPENDIX    XII.  Yearly  Average  Circulation  512 

APPENDIX  XIII.  Yearly  Average  Deposits  512 

BlBLIOGBAPHY     -                                                                                                                 -  513 

INDEX 527 


MAP  —  The  Location  of  the  Branches  and  Agencies    -    facing    376 

CHARTS  — 

CHART  I.  Operations  of  the  Bank,  February,  1817,  to  Janu- 
ary, 1819  31 

CHART  II.  Movements  of  Discounts,  Other  Loans,  and  Cir- 
culation, in  the  Face  of  an  Attempt  to  Curtail 
Business  149 

CHART  III.  Expansion  at  the  Western  and  Southwestern 
Offices  in  the  Face  of  an  Attempt  to  Contract, 
September,  1831-32  151 

CHART  IV.    Contraction  of  1833-34  323 

CHART     V.    Movement  of  Principal  Items  When  Closing  up 

the  Bank  361 

CHART  VI.    Issues  and  Deposits      ------      427 


CHAPTER  I 

ESTABLISHMENT  OF  THE  BANK 

THE  Second  Bank  of  the  United  States  owed  its  origin 
to  the  disasters  of  the  war  of  1812,  its  existence  to  the 
party  of  strict  construction  founded  by  Jefferson  and 
Madison.  A  brief  survey  of  the  state  of  the  finances  result- 
ing from  that  war  will  reveal  the  necessity  which  impelled 
the  Republicans  to  surrender  their  cherished  constitutional 
principles  and  create  a  "  monster  "  bank. 

In  1811  the  charter  of  the  First  Bank  of  the  United 
States  expired,  and  Congress,  imbued  with  constitutional 
scruples  and  actuated  by  bitter  hostility  to  Secretary 
Gallatin,  refused  to  renew  it.  This  act  was  the  beginning 
of  financial  confusion  and  financial  shipwreck,  and  foresee- 
ing the  result  Gallatin  fled  from  the  treasury  as  soon  as  he 
could  honorably  do  so.  Thereupon  William  Jones,  secre- 
tary of  the  navy,  became  acting  secretary  of  the  treasury, 
and  in  his  person l  helpless  inefficiency  was  placed  in  control 
of  the  government  finances.  Surrendering  the  post  in 
February,  1814,  he  was  succeeded  by  the  equally  inefficient 
George  W.  Campbell.2 

The  result  was  that  the  administration  of  the  finances 
could  not  possibly  have  been  worse.  In  addition,  Congress, 
after  refusing  to  re-charter  the  bank,  failed  to  make  proper 
provision  for  a  war  revenue,  being  convinced  that  hostilities 
could  be  supported  from  the  proceeds  of  the  peace  revenue 
supplemented  by  loans,  in  spite  of  the  fact  that  in  1811  the 

i"  During  the  disconsolate  interval,  from  May,  1813,  till  February,  1814,  Mr. 
Jones  imperfectly  performed  the  routine  duties  of  that  vital  organ."— INGEBSOLL, 
The  Second  War  with  Great  Britain,  Vol.  II,  p.  252. 

2  Ibid.,  p.  253. 

1 


2   THE  SECOND  BANE  OP  THE  UNITED  STATES 

ordinary  revenue  had  been  not  more  than  adequate  to  dis- 
charge the  ordinary  expenses.1  It  was  presumed  that  loans 
would  be  easily  negotiated,  even  though  Congress  failed  to 
take  any  measures  to  provide  for  their  repayment,2  and 
though  the  moneyed  men  of  the  East  refused  assistance  to 
the  government.  A  brief  experience  brought  disillusion- 
ment. The  tariff  dues  dwindled  to  almost  nothing,  while  the 
project  of  borrowing  the  necessary  funds  soon  proved  utterly 
vain. 

Two  methods  of  raising  loans  were  adopted.  The  first 
was  to  increase  the  funded  debt  by  the  sale  of  bonds ;  the 
second,  to  issue  treasury  notes.  Congress  authorized  bond 
issues  during  the  years  1812-14  to  the  amount  of  $61,000,000,3 
but  the  administration  procured  only  $45,172,581,*  and  of 
this  only  the  sum  of  $7,860,000  was  negotiated  at  par,  the 
rest  being  taken  at  rates  varying  from  $88  to  $80  in  cash 
for  $100  in  stock.5  The  direct  loss  to  the  government  was 
over  $6,000,000,  and  there  was  an  even  more  serious  indirect 
loss  resulting  from  the  circumstance  that  much  of  the  paper 
money  paid  to  the  government  for  its  stock  was  depreciated 
from  20  to  30  per  cent.6  An  excellent  example  of  the 
manner  in  which  stock  loans  were  negotiated  is  presented  by 
the  failure  of  the  $25,000,000  loan  of  1814.  Secretary 
Campbell,  despite  the  most  strenuous  exertions,  was  able  to 

i  SEC.  DALLAS,  Dec.,  1815,  Reports  on  the  Finances,  Vol.  II,  p.  5. 

2INGERSOLL,  Vol.  II,  p.  251;  DALLAS,  Dec.,  1815,  Reports  on  the  Finances,  Vol. 
II,  p.  6. 

3  DALLAS,  ibid.,  pp.  7-12.  *  Ibid.,  p.  15.  5  ibid.,  p.  17. 

« The  Committee  of  Ways  and  Means  declared  in  1830  that  "  The  government 
borrowed,  during  the  short  period  of  the  war,  eighty  millions  of  dollars,  at  an 
average  discount  of  fifteen  per  cent.,  giving  certificates  of  stock,  amounting  to  eighty 
millions  of  dollars,  in  exchange  for  sixty-eight  millions  of  dollars,  in  such  bank 

paper  as  could  be  obtained But  the  sum  of  sixty-eight  millions  of  dollars, 

received  by  the  government,  was  in  a  depreciated  currency,  not  more  than  half  as 
valuable  as  that  in  which  the  stock  given  in  exchange  for  it,  has  been  and  will  be 
redeemed.  Here,  then,  is  another  loss  of  thirty-four  millions,  ....  making,  with 
the  sum  lost  by  the  discount,  forty-six  millions  of  dollars."— H.  R.  358, 21st  Cong., 
1st  Sess.,  p.  12. 


ESTABLISHMENT  OP  THE  BANK 


secure  only  $10,400,000  of  this  sum.  In  July,  in  answer  to 
a  request  for  $6,000,000,  he  received  offers  for  $2,500,000, 
and  was  compelled  to  accept  $80  in  cash  for  $100  in  stock. 
The  immediate  consequence  was  that  the  loan  of  $9,000,000, 
negotiated  in  the  previous  spring  at  $88  on  the  $100,  had 
also  to  be  granted  at  the  rate  of  $80  on  the  $100,  since 
Campbell  had  agreed  to  allow  the  takers  of  that  sum  the 
best  terms  given  on  any  part  of  the  loan.  Even  then  many 
subscribers  failed  to  fulfil  their  contracts.1  The  result  had 
justified  Webster's  opinion  that  the  loan  for  the  year  would 
fail  unless  a  bank  could  be  established.2  It  seemed  "that 
loans  on  any  terms"  were  "  totally  at  an  end,"3  and  that  the 
"  system  had  at  length  entirely  exploded,  ....  notwith- 
standing the  Government  had  been  prepared  to  accept  terms 
of  the  most  extravagant  and  ruinous  character. " 

The  reliance  upon  treasury  notes  had  proved  equally  futile. 
Beginning  with  June  30,  1812,  and  ending  with  December 
26,  1814,  Congress  authorized  the  emission  of  $35,500,000 
in  treasury  notes,  at  5f  per  cent,  interest,  reimbursable 
in  one  year  from  the  date  of  issue,  receivable  in  payment  of 
all  duties,  taxes,  and  debts  due  to  the  United  States,  not  a 
legal  tender,  and  to  be  issued  only  at  par.5  Of  this  amount 
only  $17,227,280  were  issued,  and  but  a  small  part  of  this 
sum  was  in  circulation  at  any  one  time,  since  the  notes, 
though  legally  not  redeemable  for  one  year,  were  indirectly 
redeemable  at  once  because  the  government  was  bound  to 
receive  them  in  all  payments  of  debts  and  taxes  due  to  it. 

>  SEC.  CAMPBELL,  Sept.  23, 1814,  Reports  on  the  Finances,  Vol.  I,  p.  528. 

2  Webster  to  E.  Webster,  March  28, 1814,  Correspondence,  Vol.  I,  p.  243. 

3  SAMUEL  INGHAM,  Nov.  17, 1814,  A.  of  C.,  13th  Cong.,  Vol.  Ill,  p.  592. 

*  THOMAS  OAKLEY,  Oct.  21,  1814,  ibid.,  p.  421.  Dallas,  speaking  of  April,  1814, 
says:  "The  plan  of  finance,  which  was  predicated  upon  the  theory  of  defraying 
the  extraordinary  expenses  of  the  war  by  successive  loans,  had  already  become 
inoperative."— Reports  on  the  Finances,  Vol.  II,  pp.  11, 12. 

5  Statutes  at  Large,  Vol.  II,  p.  766,  June  30, 1812,  $5,000,000;  ibid.,  p.  801,  Feb.  25, 

1813,  $10,000,000;  ibid.,  Vol.  Ill,  p.  100,  March  4, 1814,  $10,000,000;  ibid.,  p.  161,  Dec.  26, 

1814,  $10,500,000. 


4   THE  SECOND  BANK  OF  THE  UNITED  STATES 

Moreover,  the  period  of  issue  was  so  brief  that  the  treasury 
was  kept  busy  redeeming  old  issues  almost  as  rapidly  as  new 
ones  were  made.1  Secretary  Campbell  calculated  that  it  was 
not  possible  to  keep  in  circulation  over  $6,000,000  of  treas- 
ury notes.2 

By  May,  1813,  Congress  had  become  convinced  that  some 
fixed  provision  for  the  payment  of  loans  must  be  made,  and 
had  begun  "to  lay  the  foundation  of  a  system  of  internal 
revenue."  Later  it  largely  increased  the  taxes  then  laid.3 
But  events  had  now  progressed  so  far  that  the  condition  of 
the  treasury  was  desperate.  The  banks  of  the  country,  with 
the  exception  of  those  in  New  England,  suspended  specie 
payments  in  August  and  September,  1814,4  and  the  result 
upon  the  finances  of  the  United  States  was  immediate  and 
destructive.  Had  there  existed  a  national  bank,  suspension, 
though  injurious  to  the  country,  might  have  been  beneficial 
to  the  government;5  but  without  the  bank,  since  the  state 
banks  would  neither  pay  specie  nor  accept  each  other's  notes 
at  par,  the  country  was  left  without  any  common  medium  of 
exchange,  and  hence  the  government  was  forced  to  receive 
its  revenues  in  state-bank  paper  and  treasury  notes  of  all 
degrees  of  depreciation.6  Notes  at  par  in  one  section  of  the 

i  Amount  of  treasury  notes  outstanding  Jan.  1,  1813,  $2,835,500;  Jan.  1,  1814, 
$4,907,300;  Jan.  1,  1815,  $10,646,480.— DALLAS,  Dec.  1815,  Reports  on  the  Finances, 
Vol.  II,  p.  50. 

2 CAMPBELL,  Dec.,  1814,  ibid.,  Vol.  I,  p.  529. 

3  DALLAS,  Dec.,  1815,  ibid.,  Vol.  II,  pp.  8, 12. 

*  The  capture  of  Washington  precipitated  suspension.  The  banks  of  the  District 
suspended  first,  and  were  followed  in  rapid  succession  by  those  of  Maryland,  Penn- 
sylvania, New  York,  New  Jersey,  Virginia,  Ohio,  and  Kentucky.  The  New  England 
banks  did  not  suspend,  though  some  sixteen  or  eighteen  country  banks  in  that  part 
of  the  nation  used  the  suspension  as  a  pretext  to  pay  or  not,  as  circumstances 
directed.— NILES,  Vol.  VII,  Appendix,  p.  175. 

5  "  Suspension  mattered  little,  and  had  the  national  bank  been  in  existence,  the 
failure  might  have  been  an  advantage  to  the  government."— ADAMS,  History  of  the 
United  States,  Vol.  VIII,  p.  214. 

6 Sept.,  1814,  at  Boston,  Baltimore  paper,  20  per  cent,  discount;  New  York,  10  per 
cent.— ADAMS,  Gallatin's  Writings.  Vol.  Ill,  p.  363.  Jan.  19, 1815,  New  York  paper, 
19-20  per  cent,  discount;  Philadelphia,  22  per  cent. ;  Baltimore,  25  per  cent. ;  Feb.  1,  at 
Boston,  New  York  paper,  20-24  per  cent,  discount ;  Philadelphia,  24  per  cent. ;  Balti- 


ESTABLISHMENT  OF  THE  BANK 


Union  were  at  a  heavy  discount  in  another,  and  the  rate 
varied  "  not  only  from  time  to  time,  but  at  the  same  time 
from  state  to  state,  and  in  the  same  state  from  place  to 
place."1  The  result  was  that  the  government  found  itself 
burdened  with  an  enormous  mass  of  depreciated  paper  cur- 
rent only  in  the  immediate  vicinity  of  its  issue.  To  dis- 
charge a  debt  in  New  England  it  must  offer  specie  or  New 
England  notes,  since  nothing  else  was  current  there ;  while 
in  New  York  no  one  would  accept  anything  of  less  value 
than  specie,  New  England  notes,  or  New  York  notes.  In 
Pennsylvania,  again,  New  York  notes  would  not  be  received 
at  par,  and  in  the  rest  of  the  country  neither  New  York  nor 
Pennsylvania  notes  were  acceptable.  Since  Congress  had 
not  authorized  the  treasury  to  make  any  allowance  for  dis- 
count in  such  cases,  the  government  could  not  employ  issues 
of  one  state  in  another  state  ;2  nor  would  treasury  notes 
suffice  to  discharge  the  debt,  for  by  the  law  they  must  be 
issued  at  par,  and  yet  were  depreciated  in  the  open  market, 
often  to  a  greater  extent  than  bank  notes.3  Hence  no  one 
would  receive  them  unless  forced  to  do  so.*  Meanwhile, 

more,  30  per  cent. ;  United  States  6  per  cents,  40  per  cent. ;  treasury  notes,  from  24  to  25 
per  cent.— NILES,  Vol.  VII,  Appendix,  p.  176.  July,  1815,  specie  premium,  20  per  cent, 
in  Baltimore;  11  per  cent,  in  Philadelphia;  14  per  cent,  in  New  York.— ADAMS, 
GallatMs  Writings,  Vol.  Ill,  p.  363. 

1  ADAMS,  ibid.,  p.  331. 

2  "  From  the  suspension  of  specie  payments  and  from  various  other  causes  .... 
differences  in  the  rate  of  exchange  arose  between  the  several  states ;  and  the  embar- 
rassments of  the  treasury  were  more  and  more  increased,  since  Congress  had  not 
sanctioned  any  allowance  on  account  of  the  rate  of  exchange  ....  wherever  the 
treasury  failed  in  procuring  a  local  currency,  it  failed  also  in  making  a  stipulated 
payment."— DALLAS,  Dec.,  1815,  Reports  on  the  Finances,  Vol.  II,  p.  25.    Eppes  said : 
"  The  notes  of  New  York  and  Philadelphia  will  not  be  received  in  Boston ;  the  notes  of 
Baltimore,  or  of  the  District  of  Columbia,  will  not  answer  for  payments  in  Phila- 
delphia."— A.  of  C.,  13th  Cong.,  Vol.  Ill,  p.  378,  Report,  Oct.  10, 1814. 

3  Note  2,  supra ;  also  NILES,  Vol.  VIII,  pp.  422,  423.    "  Payments  in  bank  paper 
were  universally  preferred  during  that  period."— DALLAS,  Dec.,  1815,  Reports  on 
the  Finances,  Vol.  II,  p.  25. 

*"  Treasury  notes,  which  none  but  necessitous  creditors,  or  contractors,  in  dis- 
tress, or  commissaries,  quartermasters,  and  navy  agents,  acting,  as  it  were  officially, 
seemed  willing  to  accept."— DALLAS,  A.  of  C.,  13th  Cong.,  Vol.  Ill,  p.  652  Nov.  27, 
1814. 


6   THE  SECOND  BANK  OP  THE  UNITED  STATES 

large  sums  on  deposit  for  the  government  in  southern  or 
western  banks  were  almost  utterly  useless,  because  they  could 
not  be  transferred  to  the  places  where  they  were  payable ; 
and  the  future  promised  no  relief,  since  the  taxes  were  paid, 
not  in  specie,  but  in  treasury  notes,  which,  "  almost  as  soon 
as  they  were  issued,  reached  the  hands  of  the  collectors,  in 
payment  of  debts,  duties,  and  taxes  ;  thus  disappointing  and 
defeating  the  only  remaining  expectations  of  productive 
revenue."1  The  effect  upon  the  finances  was  literally  anni- 
hilating. 

Such  being  the  situation,  the  machinery  of  government 
threatened  to  come  to  a  disastrous  stop.  In  November, 
1814,  Secretary  Dallas  was  compelled  to  announce  to  the 
holders  of  government  securities  in  Massachusetts  that  the 
treasury  could  no  longer  pay  the  interest  on  the  national 
debt  held  in  that  section,  having  neither  specie  nor  New 
England  bank  notes  with  which  to  pay.3  At  the  same 
moment  the  administration  failed  to  redeem  treasury  notes 
at  Boston,  Philadelphia,  and  New  York  ;3  it  actually  paid 
some  of  its  soldiers  in  bank  notes  which  were  not  receivable 
in  discharge  of  taxes  ;4  it  could  not  obtain  funds  "  to  defray 
the  current  ordinary  expenses  of  the  different  departments." 
The  State  Department  was  unable  to  discharge  its  stationery 
bill ;  "  the  treasury  was  obliged  to  borrow  pitiful  sums,  which 
it  would  disgrace  a  merchant  in  tolerable  credit  to  ask  for;" 
the  War  Department  could  not  pay  a  bill  for  $3,500  ;  "the 
paymaster  was  unable  to  meet  demands  for  paltry  amounts — 
not  even  for  $30 ;" 5  the  deficit  for  the  coming  year  would 
probably  reach  $40,000,000.'  Meanwhile,  the  government 

1  DALLAS,  A.  of  C.,  13th  Cong.,  Vol.  Ill,  p.  652. 

2  Dallas  to  commissioner  of  loans  at  Boston,  Nov.  9,  NILES,  Vol.  VII,  p.  270. 

3  Dallas  to  Eppes,  Dec.  2,  1814,  Schedule  A,  A.  of  C.,  13th  Cong.,  Vol.  Ill,  pp. 
767,  768.    The  amount  was  $1,902,680.80. 

*  Dallas  to  Eppes,  Nov.  23, 1814,  ibid.,  p.  717. 

5  HANSON,  of  Maryland,  Nov.  28, 1814,  ibid.,  pp.  636,  657. 

•Webster  to  E.  Webster,  Jan.  22, 1815,  Correspondence,  Vol.  I,  p.  250. 


ESTABLISHMENT  OF  THE  BANK 


"was  subsisting  upon  the  drainings  of  unchartered  banks  in 
the  District," l  and  on  the  proceeds  of  temporary  loans  pro- 
cured from  various  state  banks,  as  a  matter  of  grace  on  their 
part.2 

These  were  the  events  which  compelled  the  Republicans 
to  establish  a  bank.  Yet  long  before  their  culmination 
attempts  had  been  made  to  pass  a  bank  bill.3  The  history  of 
the  various  efforts  naturally  falls  into  three  periods :  (1)  the 
attempt  while  the  war  was  in  progress,  before  suspension ; 
(2)  during  the  war,  after  suspension  ;  (3)  after  the  war. 

1.  During  the  war — before  suspension. — On  January  4, 
1814,  Mr.  Lefferts,  of  New  York,  presented  the  petition  of 
one  hundred  and  fifty  citizens  of  that  state  "  praying  for 
the  incorporation  of  a  National  Bank,  with  a  capital  of 
$30,000,000."  *  This  petition  was  referred  in  the  House  to 
the  Committee  of  Ways  and  Means,  whose  chairman  was 
John  W.  Eppes,  son-in-law  of  Thomas  Jefferson,  and  the 
leader  in  Congress  of  the  Virginia  party,  which  adhered 
tenaciously  to  the  doctrine  of  strict  construction  and  be- 
lieved firmly  in  the  adequacy  of  treasury  notes  to  meet 
the  existing  conditions.5  The  committee  shared  these  views, 
and  on  the  10th  Eppes  reported  against  the  proposition 
because  it  was  unconstitutional  to  "create  corporations 
within  the  territorial  limits  of  the  States,  without  the 
consent  of  the  States." 6  Calhoun,  who  proved  himself  the 
real  leader  of  the  bank  party  in  Congress,  now  suggested 
that  the  constitutional  objection  might  be  obviated  by  estab- 
lishing the  bank  in  the  District  of  Columbia,  and  moved 

i  HANSON,  loc.  cit.         2  DALLAS,  Dec.,  1815,  Reports  on  the  Finances,  Vol.  II,  p.  19. 

3  Gallatin,  on  leaving:  the  treasury  in  May,  1813,  had  drawn  up  the  charter  of  a 
new  bank. — ADAMS,  History  of  the  Administrations  of  Jefferson  and  Madison,  Vol. 
VII,  pp.  45,  46. 

*  A.  of  C.,  13th  Cong.,  Vol.  I,  p.  844.  The  petition  was  dated  Dec.  18, 1813.— Ibid., 
p.  874.  A  similar  petition  from  Philadelphia  was  presented  Jan.  20, 1814.— Ibid.,  p.  1058. 

5  Jefferson  to  Eppes,  Sept.  11, 1813,  Works,  Vol.  VI,  p.  199. 

64.  of  C.,  13th  Cong.,  Vol.  I,  p.  873. 


8   THE  SECOND  BANK  OP  THE  UNITED  STATES 

the  reference  of  this  suggestion  to  the  consideration  of  the 
Committee  of  Ways  and  Means.1  His  motion  prevailed. 
As  Eppes  could  not  be  persuaded  to  support  any  bank  bill,''' 
John  Taylor,  of  New  York,  reported  from  the  committee  a 
bill  to  erect  a  bank  in  the  District,  with  a  charter  for  twenty 
years  and  a  capital  of  $30,000,000,  the  government  to  sub- 
scribe one-fifth  of  the  stock  and  appoint  one-fifth  of  the 
directors.  There  were  to  be  no  branches.3  This  last  provi- 
sion rendered  the  proposed  bank  no  longer  obnoxious  to  the 
strict  constructionists,  but  also  incapable  of  providing  a 
national  currency,  and  consequently  unsatisfactory  to  all  who 
desired  to  meet  the  existing  emergency.  "  Everyone,"  said 
Fisk,  of  New  York,  " .  ...  must  perceive  that  a  bill  contain- 
ing such  provisions  would  not,  could  not,  pass."  Neverthe- 
less, his  motion  to  refer  the  matter  to  a  select  committee 
"with  instructions  to  report  a  bill  to  establish  a  National 
Bank,  with  provisions  for  branches,"  *  was  decidedly  nega- 
tived.5 Thus  ended  the  first  attempt  to  establish  a  bank. 

On  the  2d  of  April  the  subject  came  up  again,  Felix  Grundy, 
of  Tennessee,  the  recognized  spokesman  of  the  administration 
in  the  House,  submitting  a  resolution  for  the  appointment  of 
a  committee  "  to  inquire  into  the  expediency  of  establishing 
a  National  Bank." 6  The  putative  support  of  the  adminis- 
tration put  a  new  face  on  the  matter,  and  the  House  rallied 
to  the  project.  The  strict  constructionists  were  completely 
routed,  a  motion  to  confine  the  bank  to  the  District  receiving 
but  thirty-two  votes  and  Grundy 's  resolution  being  carried.7 
On  the  committee  were  appointed  Grundy,  Calhoun,  William 
Lowndes,  and  six  others.8  Only  one  of  the  number  was 

i  A.  of  C.,  13th  Cong.,  Vol.  I,  p.  1235,  Feb.  4, 1814.  2  Ibid.,  Vol.  II,  p.  1861. 

3  Ibid.,  p.  1579.  4/Md.,  p.  1860.  5  ibid.,  p.  1862.    Only  36  ayes. 

*Ibid.,  p.  1942.  ^  ibid.,  p.  1956.    Vote,  76  to  69. 

8/6td.  Felix  Grundy,  Tennessee;  John  C.  Calhoun,  South  Carolina;  William 
Lowndes,  South  Carolina;  Samuel  Q.  Ingham,  Pennsylvania;  Thomas  J.  Oakley, 
New  York;  Artemas  Ward,  Massachusetts;  Jonathan  Fisk,  New  York;  William  Gas- 
ton,  North  Carolina ;  John  G.  Jackson,  Virginia. 


ESTABLISHMENT  OP  THE  BANK  9 

opposed  to  a  bank,  and  that  on  constitutional  grounds.1  But 
the  session  was  too  nearly  ended  to  permit  the  necessary  dis- 
cussion, and  four  days  after  its  appointment  the  committee 
was  discharged  on  the  motion  of  its  chairman.2  The  bill  was 
"  indefinitely  postponed,"  and  thus  ended  the  second  attempt 
to  establish  a  bank. 

2.  During  the  war  —  after  suspension.  —  During  the 
recess  of  Congress  the  capture  of  Washington  and  the  sus- 
pension of  specie  payments  brought  the  Union  to  the  verge 
of  dissolution.  Congress  met  in  extra  session  September 
19,  1814,  and  immediately  took  up  the  discussion  of  a  bank 
bill,  a  bank  being  now  considered  absolutely  necessary. 
Speaker  Cheves,  though  allowing  Eppes  to  retain  the  chair- 
manship of  the  Committee  of  Ways  and  Means,  appointed 
all  of  his  associates  from  the  ranks  of  the  bank  party,3  and 
a  petition  from  New  York  city  praying  for  the  establishment 
of  a  bank  was  at  once  referred  to  the  committee. 

The  overwhelming  distress  of  the  preceding  months  had 
at  last  shaken  loose  Campbell's  incompetent  grip  upon  the 
treasury  department.  He  was  succeeded  by  Alexander  J. 
Dallas,  of  Philadelphia,*  a  capable  lawyer,  whom  President 
Madison  had  wished  to  appoint  earlier  in  the  year,  but  had 
been  restrained  from  so  doing  by  the  hostility  of  the  Penn- 
sylvania senators.  The  needs  of  the  hour,  however,  swept 
away  all  opposition.5  Dallas's  appointment  was  understood 
by  everyone  to  mean  a  national  bank.  Eppes,  who  still 
desired  to  pour  out  untold  millions  of  almost  worthless  treas- 

1  Jackson,  of  Virginia.    He  was  perfectly  willing  to  have  a  bank  if  the  constitu- 
tional question  could  be  avoided. — INGEKSOLL,  Vol.  II,  p.  250. 

2  A.  of  C.,  13th  Cong.,  Vol.  Ill,  p.  2002,  April  8. 

3INGEBSOLL,  Vol.  II,  p.  253.  Members:  Eppes,  Virginia;  Stevenson  Archer, 
Maryland ;  Jonathan  Fisk,  New  York ;  Thomas  J.  Oakley,  New  York ;  William  Gas- 
ton,  North  Carolina ;  Samuel  D.  Ingham,  Pennsylvania ;  William  Creighton,  Ohio. — 
A.  of  C.,  13th  Cong.,  Vol.  Ill,  p.  303,  Sept.  21. 

*Oct.  5, 1814.  s  INGEBSOLL,  Vol.  II,  p.  253. 


10  THE  SECOND  BANK  OP  THE  UNITED  STATES 

ury  notes,1  addressed  a  letter  to  Dallas,  asking  him  to  express 
his  opinion  to  the  Committee  of  Ways  and  Means  on  the 
subject  of  the  finances.2  Dallas  immediately  replied,  de- 
claring bluntly  that  treasury  notes  would  not  meet  the 
emergency,  painting  in  the  most  lively  colors  the  distress 
of  the  government,  and  ending  by  asserting  that  a  national 
bank  was  "  the  only  efficient  remedy  for  the  disordered  con- 
dition of  our  circulating  medium."  8 

This  reply  was  decisive.  On  the  24th  of  October  the 
Committee  of  Ways  and  Means  reported  a  resolution  declaring 
that  it  was  "  expedient  to  establish  a  National  Bank,  with 
branches  in  the  several  States."  *  The  House  agreed  to  the 
resolution  immediately  and  without  debate.5  Four  days 
later  it  refused  to  strike  out  the  words  "  with  branches  in 
the  several  States,"  by  the  decisive  vote  of  138  to  14,  and 
gave  the  committee  leave  to  bring  in  a  bill.6 

On  the  7th  of  November  Jonathan  Fisk  reported  as  the 
committee's  measure 7  a  bill  drawn  up  on  lines  marked  out 
by  Secretary  Dallas.  The  capital  was  to  be  $50,000,000, 
$6,000,000  of  the  amount  in  specie,  the  rest  in  government 
stock  issued  during  the  war.  The  United  States  was  to  sub- 
scribe $20,000,000.  The  bank  could  not  sell  government 
stock,  was  to  be  bound  to  loan  the  United  States  $30,000,000 
as  soon  as  it  went  into  operation,  and  the  president  of  the 
United  States  was  empowered  to  suspend  specie  payments 
when  such  suspension  seemed  necessary.8 

This  plan  did  not  contemplate  a  bank  which  would  restore 

i  On  Oct.  10  Eppes  had  reported  in  favor  of  new  issues,  saying  that  "  Treasury 
notes,  combined  with  a  system  of  taxation,  more  extended  than  the  one  heretofore 
adopted,  will  it  is  believed,  in  the  present  state  of  bank  credit,  be  found  to  be  a 
much  better  resource  [i.  e.,  than  loans]."— A.  of  C.,  13th  Cong.,  Vol.  Ill,  p.  378. 

a  Ibid.,  p.  401.  3  Ibid.,  pp.  401-9,  Oct.  17, 1814. 

*  Ibid.,  p.  457.    Report  brought  in  on  the  21st.  5  Ibid.,  p.  458. 

e  Ibid.,  pp.  498, 499,  Oct.  28.  "  State  sovereignty  was  laid  low."—  INGERSOLL,  Vol. 
II,  p.  255.  Vote  to  bring  in  the  bill,  93  to  54. 

i  A.  of  C.,  13th  Cong.,  Vol.  Ill,  pp.  534,  535. 

SDallas's  outline,  ibid.,  pp.  404-6,  Oct.  17, 1814. 


ESTABLISHMENT  OF  THE  BANK  11 

specie  payments,  nor  even  one  that  would  itself  pay  specie.1 
What  the  administration  wished  was  a  machine  which  should 
assist  in  restoring  the  credit  of  the  government,  and  make  it 
possible  to  raise  funds  to  carry  on  the  war.2  Hence  the 
provision  confining  subscriptions  in  government  stock  to  that 
issued  during  the  war  ;8  hence  the  clause  allowing  sus- 
pension, that  binding  the  bank  to  loan  the  United  States 
$30,000,000,  and  the  section  prohibiting  it  from  selling  gov- 
ernment stock.  In  a  word,  nothing  spoke  in  this  plan  but 
the  necessities  of  the  government,  and  in  accordance  with 
these  necessities  a  specie-paying  bank  —  indeed,  any  institu- 
tion deserving  the  name  of  a  bank  —  was  an  impossibility. 

It  is  not  surprising  that  this  monstrous  scheme  was  sav- 
agely attacked.  Opposition  came  from  three  quarters  :  from 
the  strict  constructionists,  a  meager  band  ;  from  the  Feder- 
alists, able,  noisy,  persistent,  and  bitterly  aggrieved  by  the 
provision  to  limit  stock  subscriptions  to  war  stock  ;*  and 
from  those  members  of  the  Republican  party  who  were 
willing  to  charter  a  bank,  but  wished  one  of  a  different  char- 
acter. This  party  was  respectable  in  size,  most  ably  led  by 
Calhoun  and  Lowndes,  and  supported  by  Speaker  Cheves. 

Calhoun  had  at  first  been  selected  by  the  administration 
to  champion  its  bill.  He  had  thereupon  devoted  much  time 

1  Madison's  veto,  Jan.  30,  1815,  second  head,  Messages  and  Papers,  Vol.  I,  pp. 
556, 557.  Webster  said :  "  It  will  be  utterly  impossible  for  the  bank  to  pay  its  notes.    No 
such  thing  is  expected  of  it.    The  first  note   it  issues  will  be  dishonored  on  its 
return."— A.  of  C.,  13th  Cong.,  Vol.  Ill,  p.  1016,  Jan.  2, 1815. 

2  "  The  objects  of  the  Government  are  to  place  the  public  credit  upon  a  solid 
and  durable  foundation;  to  provide  a  revenue  commensurate  with  the  demands 
of  a  war  expenditure,  and  to  remove  from  the  Treasury  an  immediate  pressure." 
—Dallas  to  Eppes,  Oct.  17, 1814,  A.  of  C.,  13th  Cong.,  Vol.  Ill,  p.  403. 

3  Intended  also  to  reward  Republicans  and  punish  Federalists,  since  the  latter 
held  very  little  of  this  stock. 

*Ingersoll  says:  "On  the  13th  and  14th  of  November,  1814,  came  on  the  battle  — 
not  of  the  bank,  but  of  the  stocks :  The  prevailing  controversy,  to  which  the  whole 
scheme  ultimately  fell  a  victim,  was  what  stocks  should  compose  the  capital."— Vol. 
II,  p.  256.  "  The  project  brought  in  by  the  new  Secretary  of  the  Treasury  was  calcu- 
lated only  for  the  benefit  of  the  holders  of  the  stock,  created  since  the  war." — Web- 
ster to  E.  Webster,  Nov.  24, 1814,  Correspondence,  Vol.  I,  p.  247. 


12  THE  SECOND  BANK  OF  THE  UNITED  STATES 

and  study  to  the  project,  but,  to  the  anger  and  dismay  of  the 
president  and  secretary,  had  soon  concluded  that  it  was 
totally  unsuited  to  the  crisis  and  extremely  mischievous.1 
On  the  16th  of  November,  therefore,  he  introduced  an  oppo- 
sition bill,  which  was  designed  to  meet  the  wishes  of  all 
opponents  to  the  Dallas  plan.  There  was  to  be  no  suspen- 
sion of  specie  payments;  no  government  partnership;  no 
forced  loan.  The  capital  was  to  be  $50,000,000,  $6,000,000 
in  specie  and  the  remainder  in  specie  or  treasury  notes,  a 
new  issue  of  which  should  be  made  for  the  purpose  of  sup- 
plying purchasers  of  bank  stock.2  In  this  manner  the  gov- 
ernment would  provide  itself  with  a  loan  of  $44,000,000, 
the  advocates  of  treasury  notes  would  be  appeased,  and  the 
Federalist  attack  based  on  war-loan  subscriptions  avoided. 

The  Federalists  joined  Calhoun,  and  "  generally  voted  for 
the  amendment  in  preference  to  the  first  plan." 3  The  admin- 
istration Republicans,  led  by  Ingham,  Fisk,  and  Forsyth, 
"supported  by  the  influence  of  the  administration,  backed 
by  the  money  power,  and  the  Committee  of  Ways  and 
Means,"  *  contended  for  the  treasury  plan,  especially  for  the 
provision  authorizing  a  suspension  of  specie  payments.5 
But  the  South  Carolinians  swept  all  before  them,  and  on  the 
day  after  its  introduction  Calhoun's  plan  was  substituted  for 
that  of  Dallas  by  "a  majority  of  about  sixty  votes."  6 

No  sooner  was  this  done  than  it  was  found  that  Calhoun's 
supporters  were  by  no  means  unanimous  for  his  measure. 
"The  opposition,  the  adherents  of  the  administration,  and 
those  who  had  constitutional  scruples  "  combined  against  it,7 

i  CALHOUN,  Works,  Vol.  Ill,  p.  126;  or  C.  D.,  Vol.  XIV,  Part  I,  pp.  481,  482. 

^  A.  of  C.,  13th  Cong.,  Vol.  Ill,  pp.  587,  588,  594. 

3  Webster  to  E.  Webster,  Nov.  21, 1814,  Correspondence,  Vol.  I,  p.  247. 

*  CALHOUN,  Works,  Vol.  Ill,  p.  127;  C.  D.,  Vol.  XIV,  Part  I,  p.  482. 

5  See  Ingham's  speech,  Nov.  17,  A.  of  C.,  13th  Cong.,  Vol.  Ill,  p.  601.  Here  he 
declares  that  provision  for  suspension  ought. to  be  made,  and  that  not  to  make  it 
seems  "  a  species  of  frantic  enthusiasm."  Also  INGEESOLL,  Vol.  H,  p.  256. 

«  A.  of  C.,  13th  Cong.,  Vol.  Ill,  p.  613. 

i  CALHOUN,  Works,  Vol.  Ill,  p.  127;  C.  D.,  Vol.  XIV,  Part  I,  p.  482. 


ESTABLISHMENT  or  THE  BANK  13 

while  Lowndes,  his  ablest  lieutenant,  desired  a  smaller  capi- 
tal, and  moved  to  reduce  the  sum  to  $35,000,000.*  Calhoun 
opposed  with  "  much  zeal,"  and  Lowndes's  attempt  failed, 
though  motion  followed  motion,  amendment  amendment, 
forcing  back  into  the  bill  many  of  the  objectionable  features 
of  the  treasury  plan,  while  leaving  the  nature  of  the  capital 
stock  untouched.2  So  numerous  were  the  changes  that  when 
the  bill  was  reported  to  the  House  from  the  committee  of 
the  whole,  it  was  "  so  interleaved  and  interlined  with  amend- 
ments ....  that  the  clerk  himself  could  scarcely  arrange 
them  or  the  Speaker  state  them  to  the  House."  3 

After  a  week  of  arduous  and  acrimonious  debate,  Lowndes 
declared  that  in  his  opinion  there  was  no  "  prospect  of  the 
final  passage  of  the  bill"  as  it  stood,  and  moved  its  refer- 
ence to  a  select  committee.  The  House  agreed  with  him, 
and  the  bill  was  referred  "  without  a  division."  *  The  Feder- 
alists had  consistently  supported  Lowndes's  attack  on  Cal- 
houn's  plan,  just  as  they  had  voted  with  Calhoun  against 
Dallas.  They  advocated  a  specie-paying  bank  with  a  capital 
of  $20,000,000.° 

The  select  committee  consisted  of  Lowndes,  chairman, 
and  Calhoun,  Fisk,  Forsyth,  Ingham,  Gaston,  and  Oakley,6 
all  favorable  to  a  bank  and  representing  the  different  shades 
of  favorable  sentiment.  Lowndes  appealed  to  Dallas  for  an 
opinion  on  the  advisability  of  having  a  capital  composed 
of  treasury  notes.  This  was  Dallas's  opportunity,  and  he 
returned  an  answer  which  annihilated  Calhoun's  position, 
asserting  that  his  plan  could  not  succeed,  and  that  to 
attempt  it  would  involve  the  loss  of  the  necessary  loan  for 
1815  and  the  failure  to  restore  the  nation's  credit.7  The 
result  was  disheartening.  Lowndes  reported  the  bill  back 
to  the  House  precisely  as  it  stood  when  it  was  referred  to  his 

i  A.  of  C.,  13th  Cong.,  Vol.  Ill,  pp.  621,  622,  Nov.  19.  2  ibid.,  p.  622. 

3  Ibid.  *  Ibid.,  pp.  643,  644.  5  WEBSTER,  ibid.,  pp.  642,  043. 

« Ibid.,  p.  644.  7  Dallas  to  Lowndes,  Nov.  27, 1814.,  ibid.,  pp.  652-4. 


14  THE  SECOND  BANK  OF  THE  UNITED  STATES 

committee,  declaring  that  they  had  not  "  been  able  to  dis- 
cover any  means  of  uniting  the  conflicting  opinions  on  the 
subject."  1  His  motion  to  reduce  the  capital  to  $30,000,000 
was  then  adopted,2  the  Federalists  supporting  it.  But,  hav- 
ing gone  so  far,  they  would  go  no  farther.  When  the 
speaker  put  the  motion  to  read  the  bill  for  the  third  time,  it 
was  lost  by  a  vote  of  104  to  49 ; 8  and  so  ended  the  third 
attempt  to  secure  a  bank. 

The  House  having  failed,  the  Senate  took  up  the  task. 
On  the  2d  of  December  a  bill  was  reported  there  substan- 
tially incorporating  the  provisions  desired  by  Dallas.*  The 
Federalist  senators  offered  a  feeble  opposition,  in  the  face  of 
which  the  bill  was  pushed  relentlessly  forward,  no  amend- 
ments being  permitted,  and  in  one  week's  time  it  passed  the 
Senate 5  and  went  to  the  House. 

Here  the  debate  began  on  the  23d  and  was  continued 
along  the  same  lines  as  before.  Slight  amendments  were 
made,  but  it  seemed  that  the  Republicans,  fearing  to  risk 
the  bill,  had  decided  to  waive  their  individual  preferences.6 
The  Federalists,  under  the  lead  of  Webster  and  Gaston,  of 
North  Carolina,  exhausted  all  parliamentary  means  to  defeat 
the  bill,  but  were  unsuccessful.  The  29th  of  December, 
says  Ingersoll,  "  was  the  stormiest  bank  day  of  the  session,"  7 
the  fight  being  waged  over  the  nature  of  the  government 
stock  to  be  subscribed  to  the  bank's  capital.  When  this 
matter  was  determined  against  the  Federalists  by  a  vote  of 
73  to  72,"  the  passage  of  the  bill  seemed  inevitable,  and  the 
alarmed  Federalists  made  a  bid  for  the  support  of  the  Cal- 
houn  wing  of  the  Republican  party  by  declaring  themselves 

1  A.  of  C.,  13th  Cong.,  Vol.  Ill,  p.  651,  Nov.  28, 1814. 

2  Ibid.,  p.  655.  3  ibid.,  p.  686.  *  Ibid.,  p.  119. 
5  Ibid.,  p.  126.    Vote :  yeas,  17 ;  nays,  14. 

«  "  The  details  of  the  bill  being  nearly  the  same  as  those  of  the  bill  originally 
reported  in  this  House,  were  not  proposed  to  be  changed." — Ibid.,  p.  988. 

7  Ibid.,  Vol.  II,  p.  259.  « Ibid.,  Vol.  Ill,  p.  998. 


ESTABLISHMENT  OP  THE  BANK  15 

in  favor  of  a  bank,  though  not  of  this  bank.1  Webster  pro- 
posed a  plan  which,  he  asserted,  was  the  Federalist  idea  of  a 
bank,  saying  that  for  an  institution  of  this  nature  he  should 
"  at  any  time  be  willing  to  give  "  his  "  support." a  The 
motion  on  the  Dallas  measure  was  then  put  to  a  vote, 
Lowndes  voting  for  the  bill,  Calhoun  against  it,  and  the  result 
being  81  ayes  to  80  noes.  Cheves,  the  speaker,  had  not 
voted.  He  arose,  declared  his  conviction  "  that  the  bill  pro- 
posed a  dangerous,  unexampled,  and,  he  might  almost  say,  a 
desperate  resort,"  and  cast  his  vote  in  the  negative.  The 
bill  was  lost.8  For  the  fourth  time  the  House  had  failed  to 
enact  a  charter.  Dallas  was  so  incensed  that  he  expressed 
"  his  determination  to  withdraw  from  the  treasury." 

But  the  bank  Republicans  refused  to  be  thwarted.  No 
sooner  was  the  vote  announced  than  a  motion  to  reconsider 
was  made  and,  on  the  3d  of  January,  1815,  carried  by 
107  votes  to  54. 6  The  bill  was  then  recommitted  to  a 
select  committee,8  which  reported  on  the  6th  of  January. 
The  Calhoun-Lowndes-Federalist  compromise  measure  reap- 
peared. The  capital  was  to  be  $30,000,000,  composed  of 
$5,000,000  in  specie,  $10,000,000  in  war  stock,  $15,000,- 
000  in  treasury  notes.  There  was  to  be  no  compulsory 
loan;  no  suspension;  no  government  partnership,  though 

1  Oakley  and  Stockton  "  pledged  themselves  to  vote  "  for  a  modified  bank  bill, 
and  believed  that  "  a  majority  of  their  political  friends  "  would  do  so. —  Ibid.,  p. 
1031,  Jan.  3. 

2  Ibid.,  p.  1014,  Jan.  2, 1815.    (1)  Capital,  $25,000,000,  with  privilege  to  government 
to  subscribe  $5,000,000  more  at  some  future  time.    (2)  No  suspension.    (3)  No  obliga- 
tory loan  to  government.    (4)  Bank  to  commence  operations  within  a  specified  time 
or  forfeit  its  charter.    (5)  A  certain  per  cent,  penalty  to  be  exacted  on  all  notes  not 
paid  in  specie  on  demand.    (6)  Capital  to  consist  of  $5,000,000  specie ;  $20,000,000  in 
any  6  per  cent,  stock,  or  treasury  notes.    (7)  Bank  to  be  permitted  to  sell  govern- 
ment stock. —  Ibid.,  p.  1012,  or  first  speech,  Works,  Vol.  I. 

3  A.  of  C.,  13th  Cong.,  Vol.  HI,  pp.  1025, 1026,  Jan.  2. 

*  DALLAS,  Life  of  Dallas,  pp.  138, 139.         5  A.  of  C.,  13th  Cong.,  Vol.  Ill,  p.  1030. 

*Ibid.,  p.  1031;  Samuel  McKee,  Kentucky;  Wm.  Findlay,  Pennsylvania;  Rich- 
ard Stockton,  New  Jersey ;  Timothy  Pitkin,  Connecticut ;  John  W.  Taylor,  New  York ; 
Alfred  Cuthbert,  Georgia;  Bartlett  Yancey,  North  Carolina.—  Ibid.,  p.  1032.  All 
bank  men.—  INGEESOLL,  Vol.  II,  p.  260. 


16  THE  SECOND  BANK  OP  THE  UNITED  STATES 

Congress  was  to  reserve  the  right  to  allow  the  government 
to  subscribe  $5,000,000  later.1  The  committee's  report  was 
accepted,  and  the  bill  was  passed  on  the  7th  of  January  by 
a  vote  of  128  to  38, a  most  of  the  Federalists  supporting  it. 
Their  narrow  escape  from  the  Dallas  Senate  bill  had  served 
as  a  lesson  to  them.3  Thus  the  House,  having  lacked  only  one 
vote  of  passing  a  measure  utterly  at  variance  with  the  pres- 
ent one,  after  having  overwhelmingly  defeated  a  similar  bill, 
now,  by  a  more  overwhelming  vote,  adopted  this  measure. 

The  bill  went  at  once  to  the  Senate,  which  attempted 
amendments.*  The  House,  however,  refused  to  agree  to  any 
of  them,  the  Federalists  declaring  that  the  bill  as  it  stood 
was  a  compromise  beyond  which  they  could  not  and  would 
not  go.5  The  Senate  receded  in  every  particular,  and  the 
bill  went  to  the  president,  who  kept  it  for  ten  days  and  then 
returned  it  to  the  Senate  with  his  veto.  In  doing  so  he 
explicitly  waived  the  constitutional  question.  The  proposed 
bank,  he  asserted,  would  not  fulfil  the  purposes  for  which  a 
bank  was  then  needed;  it  would  not  enhance  the  public 
credit,  provide  a  circulating  medium,  "furnish  loans,  or 
anticipations  of  the  public  revenue  ....  during  the  war. " ' 

For  the  sixth  time  everything  was  recommenced.  The 
Republicans  held  a  meeting  to  determine  on  a  bank  which 
would  conform  to  the  president's  wishes.7  This  meeting 
Calhoun  and  his  supporters  were  "  especially  invited "  to 
attend.  They  did  so.  A  compromise  between  the  adminis- 
tration plan  and  Calhoun's  was  suggested,  but  it  was  still 

i  A.  of  C.,  13th  Cong.,  Vol.  Ill,  pp.  1039, 1040.  2  ibid.,  p.  1044. 

3  "We  were  obliged  to  make  a  bank  or  let  Dallas's  plan  go."  — Webster  to  E. 
Webster,  Jan.  22, 1815,  Correspondence,  Vol.  I,  p.  250. 

*  Capital  increased  to  $35,000,000;  shares  of  $400  instead  of  $100;  suspension  to  be 
allowed— these  the  most  important.— A.  of  C.,  13th  Cong.,  Vol.  Ill,  p.  166,  Jan.  13, 
1815. 

5  Stockton,  of  New  York,  Jan.  18, 1815,  ibid.,  p.  1081. 

6  Messages  and  Papers,  Vol.  I,  pp.  555  f . 

7  JOHNSON,  of  Virginia,  A.  of  C.,  15th  Cong.,  2d  Sess.,  Vol.  IV,  p.  1248. 


ESTABLISHMENT  OP  THE  BANK  17 

unsatisfactory  to  the  South  Carolinian  and  his  adherents. 
He  thereupon  "  required  further  concessions,  which  were 
refused,"  the  administration  Republicans  asserting  that  they 
could  carry  the  bill  without  his  assistance.1  Against  the 
determined  opposition  of  this  little  knot  of  the  party,  Sena- 
tor Barbour,  on  February  6,  introduced  the  new  measure 
drawn  mostly  along  the  lines  of  the  original  Dallas  bill.2 
A  few  days'  debate  ended  in  its  passage  by  the  Senate 
substantially  unaltered.3  Two  days  later  it  came  up  for  dis- 
cussion in  the  House,  but  the  news  of  peace,  promising  an 
end  to  the  most  urgent  necessities  of  the  government,  gave 
the  whole  question  pause.  On  the  motion  of  Lowndes  the 
bill  was  indefinitely  postponed.* 

3.  After  the  war.  —  The  close  of  the  war  put  an  end  to 
the  opposition  between  Dallas  and  Calhoun,  for  it  was  no 
longer  necessary  to  erect  a  bank  for  the  purpose  of  procuring 
loans.  The  prime  necessity  now  was  to  settle  the  currency, 
which  remained  in  the  utmost  disorder,  and  to  resume  specie 
payments.  Had  it  been  possible  to  persuade  the  state  banks 
to  take  steps  looking  to  resumption,  it  is  conceivable  that  the 
administration's  advocacy  of  a  national  bank  would  have 
ceased.5  But  this  was  not  possible.  Dallas,  therefore,  again 
proposed  that  a  national  bank  be  established,  and  President 
Madison  now  broke  silence  and  in  his  annual  message  sug- 
gested such  an  institution.6 

i  CALHOUN,  Works,  Vol.  Ill,  p.  127;  C.  D.,  Vol.  XIV,  Part  I,  p.  482. 

*A.ofC.,  13th  Cong.,  Vol.  Ill,  p.  226.  $50,000,000  capital;  $20,000,000  in  treasury 
notes ;  $15,000,000  in  6  per  cent,  stock ;  $5,000,000  in  specie ;  $10,000,000  to  be  subscribed 
by  the  United  States ;  specie  payments  might  be  suspended  by  Congress ;  during  and 
for  one  year  after  the  war  government  was  to  be  empowered  to  borrow  $30,000,000 
from  the  bank  at  6  per  cent,  interest.  The  bank  was  not  to  pay  specie  until  the  first 
Monday  in  April,  1816. 

3  By  a  strict  party  vote.— Ibid.,  p.  232,  Feb.  11.  *  Ibid.,  p.  1168. 

•'  Dallas  to  the  state  banks,  March  13, 1815,  DALLAS,  Dallas,  pp.  285-7.  Also  letter 
of  Feb.  20, 1815,  ibid.,  p.  273. 

6  "  If  the  operation  of  the  State  banks  cannot  produce  this  result  [i.  e.,  the  estab- 
lishment of  a  general  medium  of  exchange],  the  probable  operation  of  a  National 
Bank  will  merit  consideration."— Messages  and  Papers,  Vol.  I,  p.  566,  Dec.  5, 1815. 


18     THE  SECOND  BANK  OF  THE  UNITED  STATES 

When  Congress  met,  Speaker  Clay  appointed  Calhoun 
chairman  of  a  select  committee  to  consider  "  so  much  of  the 
President's  message  as  relates  to  an  Uniform  National  Cur- 
rency." l  Calhoun  applied  to  Dallas  for  the  treasury's  views 
on  the  subject,  and  in  a  letter  of  December  24  the  secre- 
tary outlined  the  plan  of  the  future  bank.  It  was  on  pre- 
cisely the  same  lines  as  the  old  Bank  of  the  United  States, 
with  additions  and  modifications,  and  it  left  the  Federalists 
no  opportunity  for  offering  an  ingenuous  and  effective  oppo- 
sition.2 On  the  8th  of  January,  1816,  Calhoun  brought  in 
the  bill,3  and  on  the  26th  of  February  opened  the  discussion. 
His  argument  was  to  the  effect  that  resumption  was  absolutely 
necessary,  and  comparatively  easy,  yet  impossible  without  a 
national  bank,  since  the  state  banks  found  too  great  a  profit 
in  the  unsettled  condition  of  the  currency  ever  to  resume. 
"  Those  who  believe  that  the  present  state  of  things  would 
ever  cure  itself,"  he  asserted,  "  must  believe  what  is  impos- 
sible ;  banks  must  change  their  nature,  ....  before  they  will 
aid  in  doing  what  it  is  not  their  interest  to  do."  * 

The  Federalists  and  the  irreconcilables  among  the  strict 
constructionists  fought  the  bill  pertinaciously,  Webster  head- 
ing one  and  John  Randolph  the  other  party.  The  attack  of 
the  Federalists  was  concentrated  on  two  points:  the  size  of 

J Committee:  Calhoun;  N.  Macon,  North  Carolina;  James  Pleasants,  Virginia; 
Joseph  Hopkinson,  Pennsylvania;  Thomas  B.  Robertson,  Louisiana;  H.  St.  George 
Tucker,  Virginia ;  Timothy  Pickering,  Massachusetts.— A.  of  C.,  14th  Cong.,  1st  Sess., 
p.  377. 

21.  Principal  provisions:  (1)  An  exclusive  charter  for  twenty-one  years;  (2) 
capital,  $35,000,000,  with  a  proviso  that  Congress  might  increase  it  to  $50,000,000 ;  (3) 
United  States  to  subscribe  one-fifth  of  the  capital;  (4)  capital  to  consist  three- 
fourths  of  funded  debt,  one-fourth  of  specie. 

II.  Government  of  bank:    (1)  To  be  at  Philadelphia  and  have  branches;  (2) 
twenty-five  directors,  with  thirteen  for  each  branch;   (3)  president  of  the  United 
States  to  appoint  five  of  the  twenty-five  directors;   (8)  the  resident  stockholders, 
being  citizens,  alone  to  vote  for  directors ;  (10)  frequent  statements  to  be  furnished 
to  the  treasury. 

III.  Privileges  and  duties:  (2)  Notes  receivable  in  all  payments  to  government; 
(3)  government  transfers  to  be  made  without  charge  to  government. 

IV.  Bonus :  $1,500,000.— Ibid.,  pp.  512  f. 

3  Ibid.,  p.  494.  *  Ibid.,  p.  1064. 


ESTABLISHMENT  OF  THE  BANK  19 

the  capital1  and  the  connection  of  the  government  with  the 
bank.2  The  power  of  the  bank  was  also  represented  as  mon- 
strous, "  almost  irresistible." 3  Calhoun  answered  with  the 
assertion  that  it  was  desirable  to  have  a  capital  large  enough 
"  to  prevent  undue  profit,"  yet  small  enough  to  "  prevent  a 
loss  to  the  stockholders,"  and  held  that  a  capital  of  $35,000,- 
000  met  these  conditions.*  The  government's  connection 
was  considered  essential  because  the  bank  was  to  be  inti- 
mately associated  with  the  finances,  was  to  keep  the  public 
deposits  and  to  transfer  the  public  funds,  was  to  pay  pen- 
sions and  to  receive  the  government  dues  from  the  col- 
lectors. The  power  of  appointing  directors  was  held  to  be 
peculiarly  fitting,  because  only  so  could  an  upright  adminis- 
tration of  the  bank  be  assured.5 

There  was  a  variety  of  other  objections:  The  state  banks 
found  some  defenders,6  but  the  abuses  of  these  were  so  gross 
that  their  supporters  were  compelled  to  adopt  an  apologetic 
tone.  The  constitutional  question  was  hardly  touched, 
everyone  seeming  to  think  that  if  Madison  could  waive  it 
there  was  nothing  further  to  be  said,  while  the  rights  of  the 
states  passed  almost  in  silence. 

The  Federalists  struggled  in  vain.     On  the  28th  of  Feb- 

1  They  wished  a  reduction  to  $20,000,000.— SERGEANT,  ibid.,  p.  1066. 

2  HOPKINSON,  ibid.,  p.  1099.       3  Ibid.,  p.  1101,  and  RANDOLPH,  p.  1111. 
*Ibid.,  pp.  1066, 1067. 

5  "  The  National  Bank  ought  not  to  be  regarded  simply  as  a  commercial  bank. 
It  will  not  operate  upon  the  funds  of  the  stockholders  alone,  but  much  more  upon 
the  funds  of  the  nation.    Its  conduct,  good  or  bad,  will  not  affect  the  corporate 
credit  and  resources  alone,  but  much  more  the  credit  and  resources  of  the  Govern- 
ment.   In  fine,  it  is  not  an  institution  created  for  the  purposes  of  commerce  and 
profit  alone,  but  much  more  for  the  purposes  of  national  policy,  as  an  auxiliary  in 
the  exercise  of  some  of  the  highest  powers  of  the  Government.    Under  such  circum- 
stances the  public  interests  cannot  be  too  cautiously  guarded,  ....  The  right  to 
inspect  the  general  accounts  of  the  bank  may  be  employed  to  detect  the  evils  of  a 
mal-administration ;  but  an  interior  agency  in  the  direction  of  its  affairs  will  best 
serve  to  prevent  them."— Dallas  to  Calhoun,  Dec.  24, 1815,  ibid.,  p.  508.    This  quota- 
tion is  of  interest  as  throwing  light  on  the  conception  of  the  position  of  the  govern- 
ment directors,  which  was  afterward  so  much  disputed  under  Biddle. 

6  HOPKINSON,  ibid.,  p.  1101 ;  FOESYTH,  ibid.,  p.  1143. 


20  THE  SECOND  BANK  OP  THE  UNITED  STATES 

ruary  it  was  decided  not  to  reduce  the  capital;1  in  March, 
that  the  government  should  hold  stock  in  the  bank,2  and 
that  the  president  and  the  Senate  of  the  United  States 
should  appoint  a  number  of  the  directors.3  On  the  other 
hand,  the  power  of  Congress  to  order  a  suspension  of  specie 
payments  was  recalled,4  as  was  also  the  power  permitting  the 
president  of  the  United  States  to  name  the  president  of  the 
bank,5  that  allowing  the  increase  of  the  capital  to  $50,- 
000,000,*  and  the  right  of  subscription  to  the  capital  in  treas- 
ury notes.7  So  much  in  the  way  of  concession  was  granted, 
and  properly  granted,  but  in  regard  to  those  details  of  the 
bill  which  the  Federalists  were  pleased  to  consider  vital 
defects  the  Republicans  would  not  yield  an  iota.  They 
were  encouraged  to  stand  firm  by  the  dissension  which 
existed  in  the  Federalist  ranks.  Webster  was  apparently  in 
irreconcilable  opposition,  but  many  members  of  his  party 
from  the  middle  and  southern  states,  where  the  evils  of  the 
financial  situation  appealed  even  to  the  dullest,  refused  to 
follow  him,  and  a  keen  and  galling  exchange  of  criminations 
and  recriminations  between  these  two  wings  closed  the  final 
debate  in  the  House.8 

On  the  14th  of  March  the  bill  passed  by  a  vote  of  80  to 
7 1.9  It  went  to  the  Senate  the  next  day  and  was  debated 
there  on  the  25th.  Jeremiah  Mason,  of  New  Hampshire, 
and  Rufus  King,  of  New  York,  led  the  opposition.  But  the 
Senate,  in  those  days  a  body  of  much  speedier  action  than 
the  House,  would  not  suffer  any  amendments  touching  the 
essentials  of  the  bill,  though  slight  and  unimportant  changes 

1  A.  of  C.,  14th  Cong.,  1st  Sess.,  p.  1108.    Motion  to  reduce— vote,  49  to  74. 

2  Ibid.,  p.  1119.    Motion  that  government  should  not  hold  stock— vote,  38  to  61. 
March  1. 

3  Ibid.,  p.  1139.    Motion  against  power  to  appoint— vote  64  to  79.    March  5. 
*Ibid.,  p.  1158.    "  By  a  very  large  majority."    March  7. 

5  Ibid.,  p.  1152.    Vote,  80  to  46.    March  6.  « Ibid.,  p.  1109.    Feb.  29. 

1 Ibid.,  p.  1136.    March  4.  « Ibid.,  pp.  1339-43.  •  Ibid.,  p.  1219. 


ESTABLISHMENT  OP  THE  BANK  21 

were  made.  The  Republicans  feared  that  the  measure  would 
be  lost  if  anything  further  was  done.1  The  Senate  passed 
the  bill  on  the  3d  of  April;2  the  House,  with  little  debate, 
concurred  in  all  the  amendments3  and  forwarded  it  to  the 
president,  who  signed  it  on  the  10th.  Thus,  after  seven 
attempts,  after  more  than  two  years  of  almost  constant 
endeavor,  the  bank  was  established,  in  its  final  form 
resembling  the  old  Bank  of  the  United  States  and  that 
project  which  Madison  had  vetoed  a  little  more  than  a  year 
before.* 

i/6td.,p.238.    Bibb,  of  Georgia.        2J6Jd.,p.281.    Vote,  22  to  12.        3  ibid.,  p.  1344. 

*  Calhoun  was  the  decisive  agent  in  securing  the  charter :  "  I  might  say  with 
truth,  that  the  bank  owes  as  much  to  me  as  to  any  other  individual  in  the  country ; 
and  I  might  even  add  that,  had  it  not  been  for  my  efforts,  it  would  not  have  been 
chartered."— Calhoun  in  the  Senate,  1834 ;  BENTON,  Thirty  Years,  Vol.  I,  p.  414. 

See  Appendix  I  for  the  charter. 


CHAPTER  II 
THE  ADMINISTRATION  OF  WILLIAM  JONES 

ON  the  first  Monday  of  July,  1816,  the  subscriptions  to 
the  capital  stock  began  at  twenty  different  places  throughout 
the  Union  and  continued  for  twenty  days.  No  particular 
eagerness  to  secure  the  stock  was  shown,1  and  when  the 
returns  were  made  it  was  found  that  over  $3,000,000  were 
still  unsubscribed.  Hereupon  Stephen  Girard,  much  to  the 
relief  of  the  president  and  the  secretary  of  the  treasury, 
subscribed  for  the  entire  amount.2 

Organization  immediately  followed.  It  was  the  general 
expectation  that  the  bank  would  be  Republican,  and  the 
administration  hoped  to  make  it  so.3  Accordingly,  President 
Madison  named  all  the  government  directors  from  his  own 
party,4  and  both  Madison  and  Dallas  strove  for  the  election  of 
a  Republican  politician  as  president  of  the  bank.  This  was 
William  Jones,  recently  secretary  of  the  navy  and  secretary 
pro  tempore  of  the  treasury.5  The  stockholders,  less  par- 
tisan than  the  administration,  named  ten  Federalists  and  ten 
Republicans.6  Jones  was  then  elected  president,  and  Jona- 

1  Dallas  to  Madison,  July  7, 1816,  DALLAS,  Dallas,  p.  459. 

2  NILES,  Vol.  XI,  p.  16,  quoting  a  Philadelphia  paper  of  Aug.  27.    Dallas  writing 
to  Madison,  same  date,  says :  "  The  bank  subscription  is  filled.    The  deficit  of  the 
general  returns  ($3,000,000)  was  taken  by  Mr.  Girard  in  a  single  line,  to  the  great  dis- 
appointment of  the  brokers  and  speculators.    I  congratulate  you  upon  this  event." — 
DALLAS,  Dallas,  p.  471. 

3 "There  is  little  doubt  of  the  organization  of  the  bank  being  Republican,  and 
friendly  to  the  government."— Dallas  to  Madison,  Aug.  27, 1816,  ibid. 

*  They  were  Wm.  Jones,  Stephen  Girard,  and  Pierce  Butler,  of  Philadelphia,  Jas. 
A.  Buchanan,  of  Baltimore,  and  John  Jacob  Astor,  of  New  York.— NILES,  Vol.  X,  p. 
198;  Dallas  to  Madison,  July  7,  1816,  DALLAS,  Dallas,  p.  459;  Madison  to  Dallas, 
July  18, 1816,  ibid.,  p.  462. 

5  Dallas  to  Madison,  July  23, 1816,  ibid.,  p.  464;  same  to  same,  Aug.  3,  p.  466.  "  I 
am  very  glad  to  learn  .  .  ,  .  that  his  prospect  of  being  at  the  head  of  the  institution 
had  become  favorable."— Madison  to  Dallas,  Aug.  7,  ibid.,  p.  468. 

e  NILES,  Vol.  XI,  p.  176. 


ADMINISTRATION  OF  WILLIAM  JONES  23 

than  Smith,  of  Philadelphia,  cashier.1  By  the  7th  of  Decem- 
ber, 1816,  directors  were  appointed  for  offices  at  Boston, 
New  York,  Baltimore,  Charleston,  and  New  Orleans,2  and  by 
March  sixteen  cities  had  been  selected  as  sites  for  offices  in 
addition  to  Philadelphia.3 

The  bank's  immediate  task  was  to  secure  the  resumption 
of  specie  payments.  At  first  the  government  had  believed 
itself  capable  of  compelling  the  state  banks  to  resume.  As 
early  as  March,  1816,  Dallas  had  made  to  these  banks 
proposals,  which  were  very  advantageous  to  them4  but 
were  nevertheless  promptly  declined.  The  establishment  of 
the  bank  and  the  passage  of  Webster's  joint  resolution  of 
April  30,  1816,  requiring  that  after  the  20th  of  the  succeed- 
ing February  all  payments  to  the  United  States  should  be 
made  either  in  gold  and  silver,  "or  in  treasury  notes,  or  in 
the  notes  of  the  Bank  of  the  United  States,  or  in  notes  of 
banks  payable  and  paid  on  demand  in  specie,"5  gave  the 
government  further  hope  of  making  its  will  effective.  Con- 
sequently, on  the  22d  of  July,  Dallas  issued  a  new  circular 
proposing  that  the  state  banks,  beginning  with  October,  should 
resume  to  the  extent  of  paying  specie  for  all  their  notes  of  a 
smaller  denomination  than  $5.6  The  banks  again  refused, 
declaring  that  they  would  not  resume  until  July  1,  1817.7 
Dallas  despaired,  writing  to  Madison  that  the  success  of  the 
state  banks  in  postponing  resumption  was  "not  a  little  to  be 
apprehended."8  Crawford,  who  succeeded  Dallas  in  Octo- 
ber, made  a  final  attempt,  issuing  a  circular  to  the  banks  on 

i  Ibid.  2  ibid. ,  pp.  238,  239. 

3  Besides  those  named  above,  Washington,  Richmond,  Savannah,  Norfolk,  Lex- 
ington, Ky.,  Cincinnati,  Portsmouth,  N.  H.,  Providence,  Middletown,  Conn.,  Chilli- 
cothe,  O.,  and  Pittsburg. 

*  DALLAS,  Dallas,  p.  285,  March  13, 1815. 

5  A.  of  C.,  14th  Cong.,  1st  Sess.,  Vol.  I,  pp.  1440, 1919.  6  NILES,  Vol.  X,  p.  376. 

7  Aug.,  1816,  ibid.,  p.  423,  quoting  The  National  Intelligencer,  stating  the  action 
of  the  banks  of  New  York,  Philadelphia,  and  Baltimore.  The  other  banks  took 
equally  discouraging  action.— Secretary  Dallas's  Report,  Dec.  3, 1816,  F.,  Vol.  Ill,  p.  132. 

«  DALLAS,  Dallas,  p.  472,  Sept.  6, 1816. 


24  THE  SECOND  BANK  OF  THE  UNITED  STATES 

the  20th  of  December,  proposing  substantial  inducements  if 
they  would  resume  by  February  20,  1817.1  "This  advan- 
tageous proposition  was  declined  without  hesitation. " 2  Craw- 
ford concluded  that  the  government  could  not  compel  the 
banks  to  resume  by  the  20th  of  February,  and  therefore 
remitted  the  undertaking  to  the  bank.3 

The  situation  was  extremely  critical  for  both  the  govern- 
ment and  the  bank.  Without  the  consent  of  the  state  banks 
the  government  could  not  possibly  collect  its  revenues  after 
February  20,*  because  it  could  not  evade  the  joint  resolution ; 
and  yet  that  resolution  would  be  of  no  effect  in  securing 
specie  or  specie-paying  paper.  The  bank  for  its  part  was 
legally  bound  to  incur  considerable  risk,  since  it  was 
necessitated,  under  penalty  of  forfeiting  its  charter,  to  go 
into  operation  by  the  first  Monday  in  April,  18 17.5  Between 
this  date  and  July  1  it  was  quite  possible  that  the  state 
banks  would  draw  from  it  so  much  specie  as  to  embarrass 
the  bank  and  thwart  the  policy  of  resumption.  It  was  neces- 
sary, therefore,  to  make  substantial  concessions  to  the  state 
banks,  if  the  government's  plans  were  to  be  carried  out. 

On  the  1st  of  February,  1817,  at  the  invitation  of  the  Bank 
of  the  United  States,  the  representatives  of  the  associated 
banks  of  Philadelphia,  New  York,  Baltimore,  and  Richmond 
met  in  convention  with  its  agents  and  discussed  the  subject. 
The  result  was  that  on  the  same  day  these  representatives 
agreed  to  recommend  to  their  directorates  to  resume  on  the 

1  At  this  time  state  banks  held  over  $11,000,000  in  public  deposits.    For  Craw- 
ford's circular  see  F.,  Vol.  IV,  p.  283. 

2  Crawford  to  the  Senate,  Feb.  25, 1823,  ibid.,  p.  266.    See  answers  to  the  proposi- 
tion by  the  state  banks,  ibid.,  pp.  974-80,  passim.    Crawford  thought  this  refusal 
meant  that  the  banks  did  not  intend  to  resume. — To  Jones,  Jan.  6, 1817,  ibid.,  p.  496. 

3  Crawford  to  Jones,  Jan.  16, 1817,  ibid. 

*  "  It  is  manifest  that,  without  the  State  banks  can  be  brought  into  an  arrange- 
ment by  which  their  paper  can  be  received  in  payment  of  taxes,  there  will  be  no 
medium  upon  the  20th  of  February  next  in  which  those  dues  can  be  paid." — Craw- 
ford to  Jones,  Jan.  24, 1817,  ibid.,  p.  497;  see  also  ibid.,  p.  767. 

5  Section  22  of  charter,  Appendix  I. 


ADMINISTRATION  OP  WILLIAM  JONES  25 

20th  of  February  in  return  for  the  following  inducements  on 
the  part  of  the  Bank  of  the  United  States : 

1.  Any  of  these  banks  indebted  to  the  Bank  of  the  United 
States  might  liquidate  the  indebtedness  by  checks  on  other 
banks,  parties  to  the  agreement. 

2.  The  Bank  of  the  United  States  would  be  responsible  to 
the  government  for  the  public  deposits  held  by  the  state 
banks,  but  the  actual  transfer  of  the  funds,  over  $8,800,000, 
was  not  to  be  made  until  July  1,  when  the  state  banks  should 
pay  them  with  interest. 

3.  Other  balances  accumulating  against  the  state  banks 
were  not  to  be  called  for  until  the  Bank  of  the  United  States 
had  discounted  for  individuals  ("other  than  those  having 
duties  to  pay"),  in  New  York  and  Philadelphia,  $2,000,000 
each;  in  Baltimore,  $1,500,000;  in  Virginia,  $500,000. 

4.  The  amount  of  these  discounts  not  taken  by  individu- 
als might  be  taken  by  the  banks  of  the  respective  places. 

5.  The  Bank  of  the  United  States  and  the  state  banks 
would  mutually  support  each  other  in  any  emergency.1 

The  agreement  was  gladly  sanctioned  by  the  secretary 
of  the  treasury,  since  its  principal  object  was  to  furnish  a 
currency  in  which  to  pay  taxes.  In  so  far  as  the  state 
banks  were  concerned,  the  articles  were  also  very  satisfac- 
tory, giving  them  time  to  reduce  in  order  to  pay  public 
funds  whose  immediate  payment  might  have  ruined  them.2 
For  the  Bank  of  the  United  States,  however,  the  articles 
were  not  so  favorable.  They  bound  it  to  meet  government 
demands  on  funds  still  held  by  the  state  banks,  and  not  to 
collect  balances  arising  in  the  ordinary  course  of  business 
until  it  had  loaned  $6,000,000  to  individuals,  not  having 
duties  to  pay,  or  to  the  state  banks.  This  stipulation  forced 
the  bank  to  make  large  loans,  whether  it  was  justified  in 

1  Appendix  II. 

2  President  State  Bank  of  Boston  to  Crawford,  Jan.  25,  1817,  F.<  Vol.  IV,  p.  982; 
President  City  Bank  of  New  York  to  same,  Feb.  19, 1817,  ibid.,  p.  987. 


26  THE  SECOND  BANK  OF  THE  UNITED  STATES 

doing  so  or  not,  and  at  the  same  time  estopped  it  from  secur- 
ing specie  from  the  state  banks,  while  giving  to  them  the 
power  to  draw  specie  from  it,  since  a  large  amount  of  its 
notes  would  be  put  in  circulation  in  discounting  $6,000,000. 
The  article  guaranteeing  mutual  protection  would  have  pre- 
cisely the  same  effect;  for,  since  the  Bank  of  the  United 
States  was  strong  and  the  state  banks  weak,  the  clause 
simply  meant  that  the  national  bank  should  support  them. 
It  is  obvious,  in  short,  that  the  entire  agreement  might  prove 
extremely  embarrassing  to  the  bank,  no  matter  how  pleasing 
it  was  to  the  treasury  and  state  banks.  The  bank,  however, 
had  secured  what  the  treasury  could  not — an  agreement  to 
resume  specie  payments  on  February  20,  and  this  was  its 
one  notable  service  to  the  country  in  its  first  years.  The 
resumption  of  the  banks  in  the  large  cities,  and  the  pressure 
of  the  treasury  and  the  Bank  of  the  United  States,  forced 
the  banks  of  the  interior  to  resume  as  well ;  and  thus  resump- 
tion was  general. 

The  most  pressing  question  after  resumption  was  that  of 
the  transfer  of  the  government  deposits.  The  arrangement 
of  the  1st  of  February  had  fixed  the  1st  of  July  as  the  date 
on  which  the  transfer  should  take  place  from  the  banks  along 
the  Atlantic  coast,  but  it  was  felt  that  in  the  case  of  the 
interior  banks  more  leniency  was  necessary,  if  numerous 
failures  were  not  to  result.1  The  bank  therefore  proposed  to 
the  state  institutions  of  the  interior  to  be  itself  responsible 
to  the  United  States  for  the  public  deposits  held  by  them,  on 
condition  that  they  would  pay  these  off  on  the  1st  of  August, 
interest  to  be  charged  from  the  first  day  of  April,  1817.  Or 
the  banks  might  pay  in  seven  monthly  instalments,  begin- 
ning with  the  month  of  May,  1817,  with  interest  from  April 
I.2  A  number  of  the  banks  willingly  accepted  these  condi- 

1  Crawford  to  Jones,  March  17, 1817,  F.,  Vol.  IV,  p.  509. 

2  J.  Smith  to  Committee  of  western  Pennsylvania,  Virginia,  and  eastern  Ohio 
Banks,  April  3, 1817,  ibid.,  pp.  788,  789. 


ADMINISTRATION  OF  WILLIAM  JONES  27 

tions.  Some,  however,  in  the  eastern  part  of  Ohio  and  the 
western  parts  of  Pennsylvania  and  Virginia,  scornfully 
rejected  them  because  they  did  not  perceive  "that  any 
advantages  could  result  to  the  banks  "  of  that  portion  of  the 
Union.1  A  refusal  so  impudent  of  what  was  purely  a  favor 
on  the  part  of  the  Bank  of  the  United  States  exhibits  its  dif- 
ficulties and  the  boundless  claims  of  these  petty  institutions.2 
The  success  of  the  bank  in  the  agreement  of  the  1st  of 
February  and  in  its  dealings  with  most  of  the  banks  of  the 
interior  was  intensely  gratifying  to  Secretary  Crawford,  who 
expressed  his  pleasure  to  President  Jones.  At  last  the  gov- 
ernment had  a  common  medium  in  which  the  people 
"  might  discharge  their  taxes,"  in  which  to  collect  its  dues 
and  pay  its  debts,  while  the  country  was  in  possession  of  a 
sound  currency.3  It  was  now  presumed  that  the  course  of 
public  finance  and  of  business  enterprise  would  be  easy  and 
plain.  Yet  there  was  much  to  show  that  the  bank  was  still 
confronted  with  enormous  difficulties.  The  business  situation 
was  not  one  to  beget  confidence.  The  changed  conditions 
resulting  from  the  cessation  of  the  war  with  Great  Britain 
had  led  to  enormous  importations  of  English  goods,  to  over- 
trading in  all  lines,  to  excessive  issues  of  bank  paper,  and  to 
a  consequent  inflation  of  prices.  Conservative  management 
was  therefore  absolutely  necessary. 

1  Jones  to  Crawford,  April  30, 1817,  ibid.,  p.  787 ;  Committee  of  western  Pennsyl- 
vania, Virginia,    and   eastern  Ohio  Banks  to  Smith,  April  14,  1817,  ibid.,  p.   788. 
Various  arrangements  seem  to  have  been  made  with  the  western  banks.    Some  of 
them  did  not  pay  interest  on  the  balances  until  the  1st  of  July.    "The    western 
banks,  which  have  enjoyed  an  immunity  from  the  payment  of  interest  from  the  20th 
of  February  to  the  1st  instant."— Crawford  to  Chillicothe  Bank,  July  23, 1817,  ibid., 
p.  544. 

2  Most  of  the  public  money  was  with  the  banks  of  the  middle  states.    Slight  mis- 
understandings occurred  even  with  eastern  banks,  as  in  the  case  of  the  State  Bank  of 
Boston,  ibid.,  p.  770,  and  the  Kennebec  Bank  of  Maine,  ibid.,  p.  813. 

3  "  The  great  objects  which  the  supporters  of  the  bank  charter  expected  from 
that  institution  have  already  been  realized.    The  vitiated  state  of  the  currency  has 
been  restored,  the  rate  of  exchange  has  been  equalized  in  every  part  of  the  nation, 
and  the  great  interests  of  commerce  substantially  promoted." —  Crawford  to  Jones, 
July  3, 1817,  ibid.,  p.  539. 


28  THE  SECOND  BANK  OP  THE  UNITED  STATES 

In  these  circumstances  the  directorate  showed  little  dis- 
cretion. It  is  true  the  government  urged  as  early  a  partici- 
pation in  business  as  possible,  sanctioned  the  agreement  of 
the  1st  of  February,  and  itself  secured  the  first  of  all  the 
bank's  loans  in  December,1  while,  largely  for  its  benefit,  indi- 
viduals were  accommodated  early  in  January.2  In  so  far  the 
government  must  share  the  responsibility  with  the  bank.  In 
March  discounts  were  $9,436,000,  while  the  circulation  was 
$4,565,398.3  The  agreement  of  February  1  was  now  in 
effect,  but  the  figures  prove  loans  far  in  excess  of  what  was 
demanded  by  that  agreement.  The  Bank  of  the  United 
States  had,  in  fact,  started  on  a  career  of  rapid  expansion, 
urged  thereto  by  the  government,  and  by  the  briskness  of 
trade  and  the  opportunities  for  favorable  investment.  In 
April,  with  six  branches  in  operation,  its  productive  funds 
amounted  to  $46,879,679,  half  of  which,  however,  was  in  gov- 
ernment stock.  Though  the  discounts  were  undoubtedly  too 
extended,  the  action  of  the  government  in  July  led  to  a 
further  expansion,  for  in  that  month  the  treasury  redeemed 
over  $13,000,000  of  the  public  stock  in  the  possession  of  the 
bank.4  The  directors  complained  bitterly  that  they  were 
thus  forced  to  grant  further  discounts,  apparently  being  of 
the  opinion  that  they  were  bound  to  secure  large  dividends, 
a  most  remarkable  criterion  by  which  to  regulate  the  busi- 
ness of  a  bank.5 

There  were  several  circumstances  in  the  bank's  situation 
at  this  moment  which  should  have  warned  all  concerned  that 
it  was  not  running  a  safe  course.  The  amount  of  specie  in 
its  vaults  was  excessively  meager.  Yet  at  no  other  period 

1  Smith  to  Crawford,  Jan.  4, 1817,  F.,  Vol.  IV,  p.  764.    The  sum  was  $500,000. 

2  Jan.  7, 1817,  ibid.,  Vol.  Ill,  p.  307;  report  of  committee  of  1819;  LOWNDES,  A.  of 
C.,  15th  Cong.,  2d  Sess.,  Vol.  IV,  p.  1298. 

3^.,  Vol.  Ill,  p.  319. 

*  $13,043,767.13.  — Report  of  the  treasurer  of  the  United  States,  ibid.,  pp.  228,  229. 
5  In  July  the  bank  paid  its  first  semi-annual  dividend.    The  rate  was  2.6  per 
cent.— Ibid.,  pp.  380,  381. 


ADMINISTRATION  OF  WILLIAM  JONES  29 

of  its  existence  was  it  more  bound  by  the  exigencies  of  the 
situation  —  by  the  over-issues  of  the  state  banks,  by  the 
inflation  of  the  currency,  by  the  almost  total  lack  of  coin 
outside  its  own  vaults — to  keep  on  hand  a  large  stock  of  the 
precious  metals.  Nevertheless,  in  April,  1817,  the  amount 
was  only  $1,811,839,  while  as  late  as  July,  after  the  pay- 
ment of  the  third  instalment  to  its  capital,  it  aggregated 
only  the  pitiably  inadequate  sum  of  $2,129,368.  At  this 
moment  the  bank  should  have  held  at  least  twice  the  amount.1 
At  no  time,  however,  during  the  first  two  years  of  its  exist- 
ence did  its  specie  holdings  reach  $3,000,000. 2  The  location 
of  its  loans  ought  also  to  have  caused  suspicion.  Although 
twelve  offices  were  doing  business  in  July,  1817,  three-fifths 
of  the  loans  were  made  at  Philadelphia  and  Baltimore,3  and 
the  same  state  of  affairs  existed  in  October,  when  these  two 
offices  discounted  over  $21,000,000  out  of  a  total  of  $33,000,- 
000.*  If  the  other  thirteen  offices  then  in  active  operation 
had  discounted  to  anything  like  this  extent,  the  loans  of  the 
bank  would  have  been  far  in  excess  of  $100,000,000. 

Nevertheless,  no  check  was  attempted,  and  the  close  of 
its  first  year  apparently  left  the  bank  in  a  very  flourishing 
condition,  a  semi-annual  dividend  of  4  per  cent,  being 
declared  in  January,  18 18.5  In  March  the  investments  were 

1  Under  the  charter  $7,000,000  of  the  capital  should  have  been  in  specie,  and  at 
least  $4,500,000  should  have  been  in  its  possession  in  January,  1817,  before  beginning 
active  operations. 

2  Specie  held  (cents  omitted) : 

1817  1818  1819 

January     -       -       -    $1,160,072  $2,184,088 

April       -       -       -          1,811,839       $2,357,137 

October     -       -       -     2,129,368 

December     -       -         2,271,611         2,666,696 

-F.,  Vol.  Ill,  p.  345. 

3  Total  discounts,  $25,770,120;  discounted  at  Philadelphia,  $10,533,120;  at  Balti- 
more, $5,224,041.— Ibid.,  p.  352.    The  offices  then  in  operation  were  those  at  Phila- 
delphia, New  York,  Baltimore,  Boston,  Washington,  Richmond,  Savannah,  Norfolk, 
New  Orleans,  Cincinnati,  Lexington,  and  Charleston. 

*At  Philadelphia,  $12,686,601;  at  Baltimore,  $8,405,902.— Ibid.,  p.  353.  Offices 
had  been  added  since  July  at  Portsmouth,  N.  H. ;  Providence,  R.  I. ;  and  Middle- 
town,  Conn. 

5/6id.,  p.  382. 


30  THE  SECOND  BANK  OP  THE  UNITED  STATES 

still  mounting,  being  then  $50,657,683.64,  over  $41,000,000 
of  which  consisted  of  loans  and  exchange.  In  July  the 
number  of  active  offices  was  nineteen,1  and  the  "total  loans" 
had  increased  to  $52,078,203.58;  the  circulation  to  $9,045,- 
216.35. 

At  this  point,  however,  the  forward  movement  was 
checked,  the  bank's  business  began  to  diminish,  and  it  was 
evident  that  something  was  wrong.  In  November  the  total 
accommodations  were  $44,115,078.59,  about  $8,000,000  less 
than  in  July,  while  circulation  had  fallen  to  $7,286,069.49, 
almost  two  millions  less  than  in  July.  The  bank  was,  in 
fact,  plunged  into  the  most  serious  embarrassments,  and  was 
struggling  to  save  itself.  The  situation  was  the  result  of 
certain  causes  which  had  been  steadily  at  work  from  the 
first.  Three  of  these  were  of  prime  importance :  mismanage- 
ment, the  state  of  the  currency  in  1817-19,  and  speculation 
and  fraud  at  Philadelphia  and  Baltimore. 

Blind  ignorance  was  probably  the  chief  factor  in  putting 
the  bank  in  peril.  President  Jones's  conception  of  the  bank's 
management  was  essentially  mistaken.  Though  he  rightly 
regarded  the  bank  and  its  branches  as  one  system,  to  be  admin- 
istered as  a  unit,  he  did  not  think  it  necessary  to  fix  the  capi- 
tals for  the  branches  and  keep  them  fixed,  compelling  the 
offices  to  settle  their  accounts  periodically  and  to  furnish 
funds  by  bills  of  exchange  or  transfer  of  specie  when  they 
drew  for  funds  by  the  issue  of  bank  notes  or  the  selling  of 
drafts.2  The  attempt  to  manage  the  institution  in  accordance 

1  Fayetteville,  N.  C.,  Chillicothe,  O.,  Louisville,  Ky.,  and  Pittsburg,  Pa.,  had 
been  added.— F.,  Vol.  Ill,  p.  354. 

2  "The  Bank  of  the  United  States  is  integral  in  its  organization,  but  indivisible 
in  its  interests.    Its  offices,  although  distantly  located,  have  no  analogy  to  institu- 
tions established  by  local  authority,  and  the  apparent  interest  of  any  particular 
office  must  necessarily  be  subordinate  to  the  general  interest." — Jones  to  the  Savan- 
nah Branch,  Dec.  5, 1817,  ibid.,  p.  335. 

"  Your  board  will  please  observe,  sir,  that  it  is  no  part  of  the  system  of  the 
parent  board  to  give  a  definite  capital  to  the  respective  offices,  to  be  employed  for 
the  benefit  of  their  several  districts ;  but  to  extend  or  control  their  operations,  as  the 
exigencies  of  commerce,  the  requisitions  of  the  Government,  and  the  general  interest 


ADMINISTRATION  OP  WILLIAM  JONES 


31 


Feb. 


Oct. 


CHART    I 
March  July 


Jan. 


$30,000,000 


45,000,000 


40,000,000 


35,000,000 


30,000,000 


25,000,000 


20,000,000 


15,000,000 


10,000,000 


5,000,000 


Total  accom- 
modations 

e.,  loani.  dls- 

coonts,  and 

United  SUU» 

•toeki 


Total  deposits 
and  circulation 
i.  e.,  immediate 

demand  liabili  tin 


Circulation 


Specie 


OPERATIONS  OP  THE  BANK,  FEBRUARY,  1817,  TO  JANUARY,  1819 


32  THE  SECOND  BANK  OP  THE  UNITED  STATES 

with  this  conception  left  the  bank  without  a  rational  plan  of 
operations.  There  was  "a  perfect  want  of  system."  1 

It  need  hardly  be  added  that  Jones  did  not  stand  alone 
in  his  ignorance,  the  directors  both  at  Philadelphia  and  at 
the  branches  being  his  peers  in  this  respect.  Moreover,  the 
officers  and  the  boards  of  the  southern  and  western  branches 
were  incompetent  and  disobedient.  All  were  swayed  by 
local  interests  in  making  discounts 2  and  did  not  understand 
the  proper  rules  of  safe  banking,  renewing  notes  over  and 
over  again,3  loaning  on  mortgages,  inventing  "  race-horse  " 
bills,4  and  issuing  notes  and  drafts  without  furnishing  the 
means  for  their  redemption.  The  losses  at  the  branches 
resulting  from  improper  management  were  enormous.5 

A  flagrant  example  of  culpable  ignorance  or  worse  was 
the  system  of  stock  loans.  The  board  at  Philadelphia  dis- 
counted on  the  bank's  stock  at  25  per  cent,  in  advance  of  its 
par  value.6  This  was  certainly  objectionable,  and  the  stock 
loans  were  reprehensible  for  several  additional  reasons: 

of  the  institution  shall  from  time  to  time  direct."— Jones  to  Charleston  Branch,  Feb. 
6, 1818,  F.,  Vol.  in,  p.  335. 

1  James  C.  Fisher  to  Ruf us  King,  Jan.  11, 1819,  Life  and  Correspondence  of  Rufus 
King,  Vol.  VI,  p.  150. 

2  "  We  have  too  many  branches,  and  the  directors  are  frequently  governed  by 
individual  and  lopal  interests  and  feelings." — Cheves  to  Crawford,  May  27,  1819, 
CHEVES,  Exposition,  Oct.,  1822,  p.  73. 

3 "  It  was  proven  that  this  note  had  been  sent  to  the  office  at  Chillicothe,  to 
renew  a  note  which  had  been  five  or  six  times  previously  renewed  by  the  same  par- 
ties."— 11  WHEATON,  433.  See  a  similar  case  of  a  note  renewed  "  every  60  days  "  from 
Dec.,  1817,  to  Feb.  1, 1820, 1  PETERS,  615. 

^  That  is,  the  payment  of  one  bill  of  exchange  by  the  purchase  of  a  new  one. 
Thus  a  bill  sent  from  New  Orleans  to  Nashville  for  collection  would  not  be  col- 
lected ;  but  instead  the  Nashville  office  would  allow  the  debtor  to  draw  a  new  bill  on 
another  office.  The  bills  kept  running  to  and  fro  without  being  paid,  and  hence 
were  called  "  racers  "  or  "  race-horse  "  bills. 

5"  A  different  management  of  several  offices  would  in  the  business  of  each  have 
saved  and  gained  more  than  would  have  paid  five  thousand  dollars  per  year  to  each 
president  of  the  branches.  Nay  there  is  no  calculating  the  actual  loss  and  the  loss 
of  gain  the  bank  has  sustained  by  the  want  of  competent  and  confidential  men  at  the 
head  of  the  branches."— Cheves  to  Crawford,  May  27, 1819,  Exposition,  p.  73. 

6  It  was  necessary,  however,  to  have  collateral  security  for  the  excess  of  25  per 
cent.— F.,  Vol.  Ill,  pp.  341,  342. 


ADMINISTRATION  OP  WILLIAM  JONES  33 

They  were  frequently  renewed,1  and  renewed  by  the  presi- 
dent and  cashier  without  the  intervention  of  the  board,  the 
directors  not  only  granting  this  power,  but  placing  the  sum 
of  $2,000,000  at  the  disposal  of  the  executive  officers  for  the 
purpose  of  making  new  stock  loans.2  The  granting  of  such 
loans  tied  up  the  capital  of  the  bank  and  placed  it  in  peril 
in  case  of  a  fall  in  the  price  of  the  stock.  Finally,  the  dis- 
counts thus  made  were  most  commonly  to  speculators  and 
brokers,3  and  were  frequently  excessive  in  amount,  loans 
being  made  to  individuals  for  sums  of  $365,000,  $400,000, 
and  $1,800,000.* 

The  western  and  southern  offices  were  suffered  to  extend 
their  discounts  at  pleasure,  since  under  Jones's  "  system  " 
their  capitals  were  not  fixed,  and  they  traded  without  any 
limit  in  that  respect.  This  was  bad  enough ;  but  worse  fol- 
lowed, for  every  restriction  on  their  operations  was  removed 
by  the  adoption  of  a  plan  to  regulate  the  currency,  com- 
mendable in  itself,  but  impossible  of  execution  in  the  exist- 
ing state  of  business.  This  was  the  attempt  to  pay  the 
notes  of  all  the  branches  wherever  presented.  The  object 
was  to  establish  a  currency  of  uniform  value  —  a  currency 
which  would  not  be  depreciated,  no  matter  how  far  it  wan- 
dered from  its  place  of  issue,  because  convertible  wherever 
the  bank  had  a  branch.  For  a  time  this  result  was  secured. 
Unfortunately  a  depreciated  state-bank  currency,  universal 
over-trading,  and  the  course  of  exchange  did  not  permit  this 
laudable  measure  to  be  successfully  continued.  The  state  of 

1  Out  of  stock  loans  for  $8,046,932.64  at  least  $5,231,267.60  was  constantly  renewed. 
—Ibid.,  p.  337. 

2  Sums  of  $500,000  were  voted  at  various  times  for  this  purpose,  from  Aug.  12  to 
Sept.  9, 1817.— Ibid.,  p.  346.    The  loans  on  bank  stock  ran  from  $9,913,277  in  Oct.,  1817, 
to  $10,335,211.46  in  Oct.,  1818,  when  the  resolutions  were  rescinded.    For  authority 
to  president  and  cashier  to  loan,  see  ibid.,  p.  341. 

STYLES,  A.  of  C.,  15th  Cong.,  2d  Sess.,  Vol.  IV,  p.  1311. 

*TYLEE,  ibid.,  p.  1316.  Lowndes,  a  consistent  friend  of  the  bank,  condemned 
these  large  loans :  "  the  discounts,  with  a  pledge  of  stock,  were,  many  of  them, 
....  excessive  in  amount." — Ibid.,  p.  1292. 


34     THE  SECOND  BANK  OP  THE  UNITED  STATES 

the  currency  and  the  business  of  the  country  determined 
that  the  course  of  exchange  should  be  almost  constantly  in 
favor  of  the  East  and  North,  and  against  the  West  and  South.1 
Under  these  circumstances  the  notes  of  the  southern  and 
western  branches  would  not  be  returned  upon  them.  Hence 
they  could  issue  their  paper  without  check.  This  they  did,2 
and  consequently  piled  up  enormous  loans.  The  Cincinnati 
branch  discounted  over  $1,800,000  in  June,  1818;  that  at 
Lexington,  Ky.,  $1,619,000  in  the  same  month,  and  $1,712,- 
000  in  November  of  that  year.  These  cases  will  serve  to 
illustrate  what  was  going  on  at  every  western  branch  of  the 
bank.3  The  discounts  at  Boston  and  New  York  were  scarcely 
larger  than  those  at  one  of  these  comparatively  insignificant 
western  towns.  Like  extravagance  characterized  the  deal- 
ings of  the  southern  offices.  But  their  notes  had  to  be 
redeemed  somewhere,  namely,  at  the  eastern  offices,  to  which 
the  course  of  exchange  carried  them.  The  result  was  that 
the  business  of  the  eastern  offices  was  almost  destroyed, 
discounts  being  low  and  the  issues  very  inconsiderable. 
They  were  denuded  of  the  little  specie  left  by  speculators 

i "  The  exchanges  between  the  West  and  the  Atlantic  are  always  against  the 
former,  ....  The  exchanges  between  the  North  and  the  Sonth  run  for  one  portion 
of  the  year  against  the  latter,  and  for  another  in  its  favor."— Report  of  Bank  Com- 
mittee, Dec.  7, 1820,  F.,  Vol.  Ill,  p.  589. 

2  See  Report,  Aug.  26, 1818,  ibid.,  p.  325.    Lowndes  said,  Feb.  20, 1819 :  "  It  was  no 
unfair  account  of  the  practical  operation  of  the  system  of  which  he  .was  speaking  [of 
paying  the  bank  notes  indiscriminately]  to  say,  that  it  gave  to  the  branches,  where 
the  exchange  was  unfavorable,  the  entire  disposition  of  the  specie  of  those  branches 
where  the  exchange  was  favorable." — A.  of  C.,  15th  Cong.,  2d  Sess.,  Vol.  II,  p.  1288. 
"  The  bills  of  the  corporation,  instead  of  circulating  as  currency,  are  converted  into 
a  medium  of  equal  exchange,  payable  at  sight,  in  any  of  the  Eastern  cities."— Report 
of  Bank  Committee,  Aug.  26, 1818,  F.,  Vol.  Ill,  p.  325. 

3  Discount  and  exchange  (cents  omitted) : 

Cincinnati  Lexington  Chillicoth*  Louisville 

1817  1817 

July       .... 
October     - 

June       .... 
November 

—Monthly  Statements  of  the  Bank,  F.,  Vol.  IV,  pp.  351-9. 


$   713,415 
1,052,615 

$   947,924 
1,084,148 

T818 

1818 

$1,836,620 
1,867,383 

$1,619,969 
1,712,023 

$565,054 
632,256 

$  938,552 
1,229,520 

ADMINISTBATION  OP  WILLIAM  JONES  35 

and  state  banks,1  and  finally  the  capital  of  the  bank  shifted 
to  the  South  and  West,  and  could  not  be  recovered. 

The  consequences  of  mismanagement  were  such  that, 
when  at  last,  in  July,  1818,  the  central  board  awoke  to  a 
consciousness  of  the  situation,  confusion  had  become  so 
great  that  they  were  absolutely  unable  to  check  the  offices. 
No  attention  was  paid  by  the  southern  and  western  branches 
to  the  reiterated  demands  that  they  should  diminish  their 
business.  In  spite  of  this  disobedience,  the  parent  board 
"  never  removed  one  of  the  offending  directors,  and  took  no 
effectual  step  to  control  them,  until  the  adoption  of  the 
general  resolutions  of  August  28,  1818." 2 

Up  to  July,  1818,  the  bank  permitted  the  state  banks  to 
over-trade  and  to  inflate  the  currency  by  the  extension  of 
the  loans  of  the  branches.3  Yet,  even  had  the  bank  man- 
aged its  own  offices  with  foresight  and  according  to  correct 
principles,  it  could  not  have  effected  the  principal  purposes 
for  which  it  was  established,  in  the  southern  and  western 
states,  because  it  lacked  courage  to  insist  upon  the  payment 
of  debts  due  to  it  from  the  state  banks.  These  had  always 
large  balances  against  them  at  the  Bank  of  the  United 
States,  constituting  loans  without  interest  to  these  amounts.* 
Not  being  called  on  for  balances,  they  continually  inflated 
their  issues  and  expanded  their  discounts.5  Moreover,  a 

1  To  the  end  of  December,  1818,  Boston  received  in  specie  $1,622,800 ;  New  York, 
$6,293,392.— jF\,  Vol.  Ill,  p.  331.    Yet  the  capital  of  these  offices  "  united  was,  at  some 
periods,  less  than  nothing."— Memorial,  Bank  of  the  United  States,  Dec.  7, 1820,  ibid., 
p.  589. 

2  "  And  such  was  the  want  of  firmness  or  of  foresight  in  the  parent  board,  that, 
after  finding  its  repeated  remonstrances  disregarded,  it  never  removed  one  of  the 
offending  directors,  and  took  no  effectual  step  to  control  them,  until  the  adoption  of 
the  general  resolutions  of  August  28, 1818,  forbidding  the  offices  to  draw  on  each 
other."  — Report  of  Investigating  Committee,  1819,  ibid.,  p.  308. 

3  Ibid.,  p.  307. 

*1817,  July,  $2,424,900;  Oct.,  $2,518,669;   1818,  March,  $1,203,874;  July,  $2,463 
1819,  Jan.,  $2,624,797;  July,  $2,908,160.— S.  D.  128,  25th  Cong.,  2d  Sess.,  p.  308. 

5  In  1818  "  silver  could  hardly  have  been  more  plentiful  at  Jerusalem  in  the  days 
of  Solomon,  than  paper  money  was  in  Ohio,  Kentucky,  and  the  adjoining  regions." — 
GOUGE  (Cobbett's  edition),  p.  90. 


36  THE  SECOND  BANK  OP  THE  UNITED  STATES 

leniency  was  shown  the  state  banks  which  was  not  extended 
to  the  national  one.1  So  many  influential  people  were 
interested  in  the  former  as  stockholders  that  it  was  not 
advisable  to  give  offense  by  demanding  payment  in  specie, 
and  borrowers  were  anxious  to  keep  the  banks  in  the  humor 
to  lend.2  Thus  the  Bank  of  the  United  States,  even  when 
it  attempted  to  press  its  claims,  found  insuperable  obstacles 
to  collecting  in  coin.3  Hence  the  state  banks  enjoyed  a 
virtual  immunity  from  the  payment  of  the  vast  majority  of 
their  notes.  In  striking  contrast  to  this  favor  shown  the 
state  banks  was  the  attitude  toward  the  national  bank. 
Banks,  brokers,  and  traders  made  a  business  of  extracting 
coin  from  its  vaults,*  an  operation  facilitated  by  its  faulty 
management  in  permitting  excessive  discounts.  Brokers 
and  bankers  constantly  bought  up  its  notes  and  presented 
them  for  redemption,  drew  specie,  sold  it  at  an  advance, 
bought  bank  notes,  presented  them,  drew  specie,  sold  it,  and 
so  on  ad  infinitum.5 

It  will  consequently  be  perceived  that  the  bank  could 
neither  keep  the  little  specie  it  began  with  nor  draw  any 

1  The  bank  was  aware  that,  "  as  it  was  professedly  a  specie  bank,  liable,  under  a 
penalty  of  12  per  cent,  per  annum  to  pay  its  notes  on  demand,  the  same  delicacy  and 
forbearance  would  not  be  extended  towards  it  as  to  the  state  banks." — RAGUET, 
"  A  Treatise  on  Currency  and  Banking,"  p.  304,  Report  to  Pennsylvania  Senate,  Jan. 
29, 1820. 

zCRAwroBD,  Report  to  H.  R.,  Feb.  12, 1820,  F.,  Vol.  Ill,  p.  496.  See  also  Craw- 
ford to  Eppes,  Dec.  29,  1818,  ibid.,  pp.  394,  395.  The  city  banks  were  "  sensible  that 
their  power  over  the  community  was  so  great,  that  few  individuals  would  have  the 
boldness  to  make  large  demands  upon  them  for  coin." — RAGUET,  "  On  Banking,"  pp. 
302,  303,  Report  to  Pennsylvania  Senate,  Jan.  29, 1820. 

3 "  The  banks,  our  debtors,  plead  inability,  require  unreasonable  indulgence, 
or  treat  our  reiterated  claims  and  expostulations  with  settled  indifference."— 
Jones  to  Crawford,  May  29, 1818,  F.,  Vol.  IV,  p.  845. 

*  "  The  fact  is,  that  the  bills  of  the  bank  are  sought  after  with  avidity  by  banks, 
brokers,  and  India  traders,  in  order  to  draw  the  specie,  which  they  find  it  imprac- 
ticable to  procure  elsewhere  but  in  a  partial  degree  and  with  great  difficulty."— 
Jones  to  Crawford,  June  23, 1818,  ibid.,  p.  854. 

5  So  laudable  was  it  consid  ered  to  aid  state  banks  against  the  national  bank 
that  even  government  collectors  occasionally  used  their  powers  for  this  purpose 
— Letter  from  Savannah  to  cashier  of  the  Bank  of  the  United  States,  quoted  by 
Cheves  to  Crawford,  July  12, 1819,  ibid.,  p.  890;  and  cashier  at  Cincinnati  to  cashier 
of  United  States  bank,  ibid. 


ADMINISTRATION  OP  WILLIAM  JONES  37 

from  the  state  banks.1  It  was,  therefore,  compelled  to 
import  specie,  if  it  wished  to  continue  paying  specie.  To 
this  foolish  task  it  gave  itself  with  something  like  enthu- 
siasm—  foolish  because  the  bank  bought  at  an  advance  in 
Europe  and  sold  at  a  loss  in  the  United  States.  This  was 
bailing  water  with  a  sieve. 

The  censure  due  to  mismanagement  can  be  measured 
only  by  taking  into  account  the  state  of  the  currency  during 
the  early  days  of  the  bank.  When  it  began  operations, 
specie  was  at  an  advance  of  14  per  cent,  in  Boston  and  New 
York,  and  of  6  per  cent,  in  the  West.2  This  premium  should 
have  ceased  on  the  20th  of  February,  and,  if  resumption  had 
been  complete,  it  should  have  ceased  everywhere.  In  May, 
however,  Niles  declared  that,  "  though  our  banks  ostensibly 
pay  specie,  it  is  almost  as  rare  as  it  was  some  months 
ago  to  see  a  dollar.  'Paper  does  the  business'  still."3  In 
July  the  prices  of  bank  paper  show  greater  variation  than 
in  February.4  In  October  Spanish  silver  dollars  were  at  a 
premium  of  1^  per  cent,  in  New  York  city,  and  Niles 
declared  that,  though  the  Bank  of  the  United  States  had 
helped  the  exchanges,  Baltimore  was  still  "  inundated  with 
paper  called  bank  notes,  at  almost  every  depreciated  rate 
from  ^  to  75  per  cent." 5  On  the  25th  of  the  same  month, 
President  Jones  asserted  that  the  paper  of  the  banks  "  of 
the  interior  of  Pennsylvania "  had  "  as  little  of  the  quality 

1 "  The  facts  which  have  been  stated  prove  that  the  Bank  of  the  United 
States  has  no  domestic  resource  by  which  to  replenish  its  vaults  with  specie." — Jones 
to  Crawford,  May  29, 1818,  F.,  Vol.  IV,  p.  845. 

2  Ibid.,  Vol.  Ill,  p.  334,  Exhibit  20.          3  NILES,  Vol.  XII,  p.  185,  May  17, 1817. 

*  In  New  York  city  Boston  notes  were  at  1A  per  cent,  and  1  per  cent,  discount; 
Baltimore,  54  percent.;  Virginia,  1  and  1!4  per  cent.;  North  Carolina,  3  per  cent.; 
South  Carolina,  11A  per  cent. ;  Georgia,  2  per  cent. ;  Louisiana,  8  per  cent. ;  New  Eng- 
land, 1  to  2  per  cent.— Ibid.,  p.  347,  July  19, 1817. 

5  New  Hampshire,  1!4  to  2  per  cent,  discount;  Massachusetts,  par  to  2  per  cent. ; 
Connecticut,  par  to  1  per  cent. ;  Rhode  Island,  1  to  3  per  cent. ;  New  York,  par  to  75 
per  cent. ;  Pennsylvania,  incorporated,  par  to  12  per  cent. ;  unincorporated,  15  to  25 
per  cent. ;  Delaware,  2  to  10  per  cent. ;  Maryland,  Baltimore,  par ;  others,  4  to  20  per 
cent,  (in  Baltimore  itself  others  were  2  to  5  per  cent,  discount) ;  District  of  Columbia, 


38  THE  SECOND  BANK  OP  THE  UNITED  STATES 

of  money  or  credit  at  this  time  as  it  had  twelve  months 
ago." '  In  March,  1818,  Spanish  dollars  bore  a  premium  of 
from  4  to  4£  per  cent,  in  New  York  and  Boston.2  In  Octo- 
ber specie  was  at  6£  to  7  per  cent,  advance  in  Boston,  and 
7  per  cent,  in  New  York.3  By  this  time  the  commercial 
panic  had  fairly  started,  and  all  through  1819  bank  notes 
went  from  bad  to  worse.  In  1820  Crawford  came  forward 
with  the  honest  confession  that  in  "  several  of  the  States  the 
great  mass  of  the  circulation  is  not  even  ostensibly  convert- 
ible into  specie  at  the  will  of  the  holder,"  and  that,  during 
"  the  greater  part  of  the  time  "  since  specie  resumption,  "  the 
convertibility  of  bank  notes  into  specie  has  been  rather 
nominal  than  real  in  the  largest  portion  of  the  Union." ' 
There  are  two  conclusions  :  first,  while  many  of  the  banks 
actually  paid  specie  for  their  notes,  the  specie  was  more 
valuable  than  the  notes;  secondly,  most  of  the  banks  only 
pretended  to  pay  specie. 

Yet  by  the  very  conditions  of  its  existence  the  Bank  of 
the  United  States  was  compelled  to  act  as  if  specie  resump- 
tion was  complete:  it  had  to  pay  specie  for  its  notes  under 
penalty,  if  it  refused,  of  forfeiting  12  per  cent,  on  the  amount 
demanded;  and  to  fail  in  restoring  specie  payments  was  to 
lose  the  very  reason  for  its  existence.  Under  these  circum- 
stances the  bank  should  have  kept  its  dealings  as  restricted 
as  possible,  for,  unless  it  did  this,  it  could  not  enforce  restric- 

Bank  of,  par ;  others  2  per  cent. ;  Virginia,  chartered  banks,  par ;  unchartered,  15  to 
25  per  cent. ;  North  Carolina,  State  Bank,  IVi  to  2  per  cent. ;  Newbern  and  Cape  Fear,  3 
to  4  per  cent. ;  South  Carolina,  1  per  cent. ;  Georgia,  2  per  cent. ;  Kentucky,  4  to  7  per 
cent. ;  Tennessee,  7  per  cent. ;  Ohio,  8  to  25  per  cent. ;  Louisiana,  5  to  10  per  cent. ; 
specie,  1  to  154  per  cent,  premium  in  New  York.— NILES,  Vol.  XIII,  p.  97,  Oct.  11, 1817. 

1  Jones  to  Crawford,  F.,  Vol.  IV,  p.  820.         2  Same  to  same,  March  9,  ibid.,  p.  832. 

3  NILES,  Vol.  XV,  p.  125,  Oct.  17, 1818. 

*  F.,  Vol.,  Ill,  p.  496,  Report,  Feb.  24, 1820.  RAQDET,  p.  303,  Report  to  Pennsyl- 
vania Senate,  Feb.  29, 1820,  says :  "  Specie  payments  were  accordingly  nominally 
resumed  on  the  appointed  day.  We  say  nominally,  because  in  point  of  fact,  a  bona 
fide  resumption  did  not  take  place  as  is  evident  from  the  well-known  circumstance, 
that  for  a  long  time  after  that  period,  American  as  well  as  foreign  coins  would 
command  on  the  spot  a  price  in  city  bank  notes  above  their  nominal  value." 


ADMINISTRATION  OF  WILLIAM  JONES  39 

tion  upon  the  state  banks,  and  without  such  restriction  no 
effective  resumption  was  possible.  The  over-issues  of  the 
banks  would  drive  specie  out  of  the  country  and  compel 
suspension. 

To  mismanagement  and  the  wretched  state  of  the  cur- 
rency were  added  speculation  and  fraud.  When  the  bank 
was  established  the  country  was  passing  through  a  period  of 
reckless  inflation  and  speculation,  in  which  gambling  in  bank 
stocks  was  one  of  the  most  marked  features.  Banks  were 
being  chartered  all  through  the  states,  and  from  1815  to 
1818  there  was  a  perfect  mania  for  them.  "  Wherever  there 
is  a  'church,  a  blacksmith's  shop  and  a  tavern'  seems  a 
proper  site  for  one  of  them!"  says  Niles.1  This  passion  for 
stock  speculation  was  unusually  violent  in  Philadelphia  and 
Baltimore,  and  at  these  places  the  opportunity  for  speculating 
in  stock  of  the  Bank  of  the  United  States  was  seized  at  once. 
At  Baltimore  40,141  shares  were  taken  in  the  names  of 
15,628  persons,  while  at  Philadelphia  twice  the  amount  was 
subscribed  for  by  3,566  persons.2  Most  of  these  shares, 
however,  were  actually  bought  by  a  few  individuals,  who 
placed  them  in  the  names  of  others  in  order  that  they  might 
increase  the  number  of  their  votes  and  thus  control  the  bank.3 
In  this  way  some  fifteen  persons  in  Baltimore  held  about 
three-fourths  of  the  stock  there,  and  probably  three-fourths 
of  all  the  bank's  stock  were  in  possession  of  less  than  one  hun- 

i  NILBS,  Vol.  XI,  p.  130. 


Boston    .... 
New  York .... 
Philadelphia 
Baltimore        ... 

Baltimore  thus  subscribed  for  about  one-seventh  the  stock,  and  had  one-fourth 
the  total  number  of  votes.  Philadelphia  had  nearly  one-third  of  the  stock,  two- 
ninths  of  the  votes.— F.,  Vol.  Ill,  p.  349. 

3  George  Williams,  of  Baltimore,  took  1,172  shares  in  1,172  names. —  Ibid.,  p.  372. 
By  the  charter  no  stockholder  could  cast  over  thirty  votes,  no  matter  how  much 
stock  he  held.—  Sec.  11,  Art.  1.  See  Appendix  I. 


lumber  of 
Shares 

Names  in  which 
Taken 

Votes         Number  of  Shares  Taken 
Authorized                by  Attorney 

24,023 

364 

4,355 

8,615 

20,012 

2,641 

6,450 

12,044 

88,520 

3,566 

19,260 

37,330 

40,141 

15,628 

22,187 

36,230 

40     THE  SECOND  BANK  or  THE  UNITED  STATES 

dred  persons.1  The  consequences  of  these  tactics  was  that  a 
clique  of  Philadelphia  and  Baltimore  stock-jobbers  controlled 
the  bank  as  soon  as  it  was  organized,  Baltimore  alone  sup- 
plying within  115  of  a  majority  of  all  the  voters  present  at 
the  first  election  for  directors.2  This  little  band  of  gamblers 
attempted,  with  only  too  much  success,  to  direct  the  bank's 
business  so  as  to  manipulate  the  price  of  the  stock  in  the 
open  market.3  The  men  who  took  the  principal  part  in  this 
action  were  directors  of  the  bank,  notably  James  Buchanan, 
George  Williams,  and  Dennis  Smith,  of  Baltimore,  assisted 
by  the  complicity  or  incapacity  of  the  president  of  the  bank 
and  the  cashiers  at  Philadelphia  and  Baltimore.  Jones's 
contemporaries  considered  him  a  man  of  integrity,4  but  it  is 
painfully  evident  that  he  was  absolutely  powerless  to  check 
the  schemes  of  the  gamblers  and  totally  blind  to  his  duty  in 
the  premises.  He  was  so  weak  as  to  permit  Buchanan, 
Smith,  and  Williams  to  make  him  a  present  of  some  $18,000 
profits  on  a  speculation  in  the  stock.5  In  addition  he  himself 

1  The  subscribers  at  Baltimore  were  "  225  or  230  all  told,"  about  fifteen  control- 
ling three-fourths  of  the  stock.—  NILES,  Vol.  XIV,  p.  35,  March  14. 1818. 

2  Ibid.,  p.  22,  March  7, 1818. 

3  The  price  of  stock  during  the  early  days  of  the  bank  will  show  with  what  suc- 
cess: April  1, 1817, 118  on  a  100;  May  12, 125;  May  28, 130;  June  9, 131;  July  10, 140.5; 
Sept.  1,  137;  Sept.  30,  151;  Oct.  16,  150.59;  Nov.  4,  150;  Dec.  1, 154;  Jan.  1, 1818, 146; 
March  11, 145;  April  15, 142;  May  4, 137;  June  1,  141;  July  1, 136;  Aug.  8,127.25;  Sept. 
24,  128 ;  Oct.  24, 114.    After  this  it  went  steadily  down,  until  in  June,  1819,  it  was  as 
low  as  92.5. —  See  "Exhibit  of  Losses  at  Baltimore,"  Conspiracy  Cases,  pp.  97-9. 

*  But  "  he  had  so  completely  involved  himself  in  the  policy  of  the  Baltimoreans, 
so  completely  was  he  taken  in  their  toils,  that  he  obeyed  no  other  impulse." — Craw- 
ford to  Gallatin,  July  24, 1819,  ADAMS,  Oallatin's  Writings,  Vol.  II,  p.  113 ;  see  also 
SERGEANT,  A.  of  C.,  15th  Cong.,  2d  Sess.,  Vol.  IV,  p.  1384. 

5  One  thousand  shares  were  purchased  for  Jones  without  his  knowledge  in  Kay, 
1817,  at  $132  a  share.  Somewhat  later  he  was  informed  of  this,  and  the  stock  was 
transferred  to  him  in  July  at  the  price  originally  paid,  though  stock  was  then  selling 
at  $140.50.  The  next  month  he  sold  it  to  D.  A.  Williams,  one  of  those  who  had  first 
bought  it  for  him,  at  $150  a  share.  Had  there  been  any  loss,  "  the  company  "  of  stock- 
jobbers had  resolved  that  Jones  should  not  share  it.  The  whole  transaction  was 
purely  speculative,  no  stock  being  transferred  from  beginning  to  end.— Jones's  testi- 
mony before  Investigating  Committee  of  1819,  F.,  Vol.  Ill,  p.  364;  Williams's  testi- 
mony, ibid.,  p.  372;  Smith's  testimony,  ibid.,  p.  374;  McCulloch's  testimony,  ibid.,  p. 
376 ;  Jones's  Memorial  to  the  House,  Feb.  5, 1819,  ibid.,  p.  413. 


ADMINISTRATION  OF  WILLIAM  JONES  41 

bought  and  sold  to  a  considerable  extent.1  Most  of  the  board 
were  as  culpable  as  Jones,  not  over  four  of  the  number  consis- 
tently opposing  the  measures  to  inflate  the  price  of  the  stock.2 
The  attempt  to  inflate  stock  values  was  evident  in  almost 
all  the  acts  of  the  directors.  Of  this  character  was  the  reso- 
lution of  the  board  to  discount  on  the  security  of  the  bank's 
stock  in  order  to  furnish  stockholders  with  facilities  to  pay 
the  second  instalment.3  By  this  action  the  specie  part  of 
the  instalment  was  for  the  most  part  left  unpaid,  the  bank 
receiving  instead  its  own  notes,  or  notes  of  the  state  banks. 
"  Thus,"  wrote  King  indignantly,  "  tho'  the  Law  says  a  sum 
in  specie  double  the  first  payment  shall  be  made  at  the  sec- 
ond period  or  Instalment,  the  Directors  feel  no  scruple  with 
a  dispensation,  which  will  prove  so  seriously  mischievous  in 
the  early  resumption  of  Cash  Payments."  *  Another  measure 
whose  prime  motive  was  to  enhance  the  price  of  the  stock 
was  the  resolution  of  the  26th  of  August,  giving  stockhold- 
ers the  privilege  of  discounting  on  their  stock  at  an  advance 
of  25  per  cent,  on  the  par  value  thereof,  the  directors  naively 
alleging,  as  a  defense  for  their  action,  that  it  was  neces- 
sary "  to  extend  the  discounts  of  the  bank,  ....  in  order 

1  He  dealt  in  1,575  shares  from  Oct.  7, 1817,  to  Aug.,  1818  (not  counting  the  above 
1,000)  at  prices  ranging  from  $139  to  $153  a  share  — in  all  over  $200,000  worth  of  stock. 
— Ibid.,  p.  364. 

2  J.  C.  Fisher  to  Rufus  King,  Jan.  25, 1819,  Life  and  Correspondence  of  Rufus 
King,  Vol.  VI,  p.  197. 

3  Resolutions  of  18th  and  27th  of  Dec.,  1816,  F.,  Vol.  Ill,  pp.  335, 336.  It  is  true,  how- 
ever, that,  resolution  or  no  resolution,  the  bank  would  have  secured  very  little  specie 
for  the  second  instalment,  for,  as  specie  was  then  at  a  heavy  premium,  it  would 
have  been   profitable  for  the  stockholder  to   refuse  payment  and  forfeit  the  first 
dividend.    Moreover,  since  the  bank  was  already  in  operation,  its  own  notes  could 
bo  presented  for  specie  with  which  to  pay  the  instalment,  as  could  also  the  notes  of 
specie-paying  state  banks.— Jones  to  Crawford,  Nov.  11, 1818,  ibid.,  p.  288.    It  was 
recognized,  when  the  charter  was  granted,  that   this  method  of  paying  instal- 
ments after  the  first  would  be  adopted  (MASON'S  remarks,  A.  of  C.,  14th  Cong.,  1st 
Sess.,  Vol.  I,  p.  236),  and,  indeed,  every  bank  chartered  in  that  day  began  operations  in 
precisely  the  same  way.— CALHODN,  Jan.  7, 1817,  A.  of  C.,  14th  Cong.,  2d  Sess.,  p.  431. 
Nevertheless,  the  directors  were  culpable  in  so  far  as  they  gave  facilities  for  evading 
the  requirements  of  the  law. 

*Life  and  Correspondence  of  Rufus  King,  Vol.  VI,  pp.  38,  39. 


42  THE  SECOND  BANK  OF  THE  UNITED  STATES 

to  afford  a  reasonable  dividend  to  the  stockholders."1 
This  was  undoubtedly  a  laudable  ambition,  and  just  as 
undoubtedly  the  highest  price  the  stock  ever  bore  follower! 
immediately  upon  the  resolution.2  A  third  measure  designed 
to  meet  the  same  purpose  was  that  creating  a  market  for  the 
stock  in  England  by  the  establishment  of  an  office  in  London 
to  pay  the  dividends  of  foreign  holders  "at  the  par  of 
exchange,  at  the  risk  and  expense  of  the  bank."  The  com- 
mittee which  recommended  this  measure  did  so  on  the  ground 
of  the  "  advantage  to  be  derived  by  enhancing  the  value  "  of 
the  stock.3  These  efforts  were  only  too  successful,  and  for 
some  time  the  stock  commanded  a  premium  of  from  50  to  56 
per  cent,  in  the  market,  an  advance  for  which  there  was  abso- 
lutely no  justification. 

The  principal  scene  of  mismanagement  and  fraud  was  the 
office  at  Baltimore,  of  which  James  A.  Buchanan  was  presi- 
dent and  James  W.  McCulloch  cashier.  Baltimore  at  this 
time  was  the  center  of  airy  speculation  and  of  all  sorts  of 
characterless  and  illegitimate  business.4  The  great  mercan- 
tile firm  of  Smith  and  Buchanan  was  the  leading  one  in  the 
city,  and  for  twenty-five  years  had  formed  and  controlled  the 
"moral,  political,  and  commercial  character"  of  Baltimore.6 
Remembering  this,  one  may  easily  imagine  that  it  boded  little 
good  to  the  bank  to  have  Buchanan  at  the  head  of  the  branch. 
McCulloch,  the  cashier,  was  a  penniless  clerk  of  the  house.8 

It  has  already  been  pointed  out  that  the  Baltimore  stock- 
holders almost  controlled  the  bank  by  the  scheme  of  buying 
names  in  which  the  stock  could  be  held.  The  next  step  of 

IF.,  Vol.  Ill,  pp.  341,  842. 

2  Philadelphia,  Aug.  30,  156.50;  Baltimore,  Sept.   7,155;  New  York,  Sept.  2, 155. 
Later  in  September  the  prices  fluctuated  between  148  and  153.—  Ibid.,  p.  347. 

3  For  resolution,  ibid.,  p.  343,  Nov  28, 1816.    The  vote  was  11  to  10.     Report  of 
committee,  ibid.,  p.  342,  Nov.  26.    See  also  letter  of  John  Donnell,  ibid.,  p.  343. 

*  J.  Q.  ADAMS,  Memoirs,  Vol.  IV,  p.  383. 

5  Ibid.    Smith  was  United  States  senator  from  Maryland.    Buchanan  managed 
all  the  business  of  the  firm.    He  was  one  of  the  first  government  directors, 
e  Ibid.,  Vol.  IV,  p.  382.    See  also  2  WHEATON,  61. 


ADMINISTRATION  OF  WILLIAM  JONES  43 

the  interested  parties  was  to  form  a  company  to  deal  in 
the  stock.  Smith  and  Buchanan,  Cashier  McCulloch,  and 
George  Williams,  all  of  Baltimore,  composed  this  company.1 
This  little  band  of  speculators  had  one  prime  object  in 
view  :  to  manipulate  the  price  of  the  stock  in  order  to  make 
fortunes.  As  means  to  attain  this  end,  they  had  possession 
of  the  Baltimore  office  and  unusual  influence  at  Philadelphia, 
where  Williams  and  Buchanan  were  directors. 

The  methods  employed  by  the  general  management  to 
inflate  the  price  of  the  stock  have  been  already  related.  At 
Baltimore  the  business  of  the  branch  was  swollen  to  an 
enormous  extent  with  the  same  object  in  view.  In  the  first 
two  years  the  Baltimore  discounts  ranged  from  five  to  twelve 
and  a  half  millions;  the  drafts  on  other  offices,  particularly 
those  in  the  North,  were  frequent  and  excessive.  Specie 
was  always  limited  in  amount,  and  once  in  1818  fell  as  low 
as  $26,714.  The  debt  to  the  bank  and  branches  was 
astounding,  being  for  the  most  of  the  time  over  $8,000,000.2 

1  George  Williams,  in  his  testimony  before  the  committee  of  the  House,  stated 
that  "he  was  concerned  in  a  company  who  purchased  largely;  Smith  &  Buchanan, 
and  Mr.  McCulloch,  of  Baltimore,  together  with  himself,  composed  the  company."— 
F.,  Vol.  Ill,  p.  372.  Williams  was  the  man  who  took  1,172  shares  of  the  stock  in  the 
names  of  1,172  persons  in  order  that  he  might  exert  a  great  influence  in  the  election 
of  directors.  —  Ibid.  The  company  also  purchased  1,000  shares  in  1,000  names  for  the 
same  purpose.  —  Ibid.,  p.  376,  McCulloch's  testimony. 


2  BUS1E 
1817 

iess  done  i 

Discounts 

5  182  031 

it  I  Salt  uno 
On 
Bank  Stock 

re  (cents 

Ex- 
change 

42,000 

i  omitted 

Issues 
418,470 

): 

Owing 
Branches 
3,309,420 

Balance 
Due  by 
State  Banks 

322,220 

Deposits 
448,766 

Specie 
219,794 

October 

1818 

July 

7,923,739 
9,289,349 

2,743,283 
3,358,349 

482,162 
5,264 

532,340 

7,232,072 
8,363,630 

228,039 
210,938 

421,019 
584,376 

90,057 
95,634 

November 

7.359.577 

2.420.235 

5.264 

8.571,554 

84,438 

26,714 

—Ibid.,  pp.  327,  351-7. 

Drafts  drawn  on  Bank  of  the  United  States  and  branches  from  April,  1817,  to  Nov., 

1818: 

On  Philadelphia         .....       $3,684,157 

On  Boston        .......      1,072,008 

On  New  York       ......         1,831,514 

On  all  others    .......      1,294,000 

Total  ........       $7,881,679 

—Ibid.,  p.  328. 

The  issues  were  not  very  extended,  but  that  was  not  the  fault  of  the  Baltimore 
managers,  Cashier  McCulloch  complaining  that  the  office  had  "  never  had  a  suffi- 
cient supply  of  its  own  notes."  —  Ibid.,  p.  377. 


44  THE  SECOND  BANK  OP  THE  UNITED  STATES 

While  working  to  increase  the  price  of  the  stock,  the 
manipulators  bought  still  larger  quantities.  In  April  and 
June,  1817,  Buchanan  and  McCulloch  purchased  19,940 
shares  in  different  lots  from  D.  A.  Smith  at  19,  20,  and  36 
per  cent,  advance,  and  in  December  12,000  shares  at  155.1 
The  total  was  31,900  shares,  for  which  they  paid  $4,451,376. 
How  much  more  extensive  their  dealings  were  cannot  be 
determined,  but  they  held  15,490  additional  shares  in  March, 
1819,2  making  the  sum  of  their  purchases  at  least  $6,397,626. 

Purchases  so  extensive  demanded  considerable  ready 
money,  and  this  Buchanan's  business  could  not  furnish.  The 
plan  adopted,  therefore,  was  to  borrow  it  from  the  bank, 
which  had  agreed  to  accept  bank  stock  at  an  advance  of  25 
per  cent,  above  par  as  security  for  loans.3  Buchanan  and 
McCulloch  consequently  borrowed  the  money  to  buy  more 
stock  on  a  pledge  of  the  stock  they  already  held.  At  the 
bank  in  Philadelphia  they  borrowed  $1,957,700  in  this  way. 
At  Baltimore  they  procured  $1,629,436.12,*  but  here,  though 
the  loans  were  presumably  secured  by  stock,  there  were 
actually  only  2,558  shares  in  the  office  to  cover  the  entire 
debt.5  At  an  advance  of  25  per  cent,  these  shares  secured  only 
$329,750  out  of  this  total  of  over  $1,600,000.  The  con- 
spirators loaned  themselves  the  remainder  without  giving 
any  security  whatever.  As  the  cashier  was  the  keeper  of  all 
stock  pledged,  none  of  the  directors  could  know  that  no  stock 
was  given  in  by  them.  That  they  might  draw  these  sums  from 
the  office  without  security,  and  without  the  knowledge  of  the 
board  of  directors,  Buchanan  and  McCulloch  declared  to 

1  Testimony  of  D.  A.  Smith,  March  28, 1823,  Conspiracy  Cases,  p.  137. 

2/Md.,  pp.  91,  92,  Paper  X. 

3 Aug.  26,  1817.  "It  is  expedient  that  the  loans  on  the  stock  of  the  bank  be 
extended  to  the  rate  of  $125  a  share,  upon  notes  to  that  amount,  with  two  approved 
names." — Ibid.,  p.  26. 

*For  the  debt  at  Philadelphia  see  ibid.,  p.  91,  Paper  X;  for  that  at  Baltimore, 
pp.  77-83,  a  list  of  loans  upon  stock  at  the  office  at  Baltimore,  March  8, 1819. 
5  Ibid.,  pp.  91,  92,  Paper  X. 


ADMINISTRATION  OP  WILLIAM  JONES  45 

the  Baltimore  board  that  the  making  of  stock  loans  was 
executive  business,  and  that  they  had  authority  from  Phila- 
delphia to  make  such  loans  without  the  consent  of  the  board. 
At  other  times,  to  conceal  their  designs  from  outside  parties, 
they  claimed  that  they  had  this  authority  from  the  Baltimore 
board.  These  declarations  were  absolutely  false.2  Neverthe- 
less the  Baltimore  directors  acquiesced,  and  their  acquiescence 
shows  reprehensible  slackness  and  almost  criminal  neglect. 

At  this  point  active  fraud  begins,  for  it  was  only  after 
the  president  and  cashier  had  arrogated  to  themselves  this 
power  that  their  debts  assumed  the  vast  proportions  already 
noted.  On  the  llth  of  August,  1817,  the  discounts  on 
bank  stock  were  only  $314,850. 3  On  the  12th,  however, 
immediately  after  the  usurpation  of  authority  by  Buchanan 
and  McCulloch,  the  sum  rose  to  $857,350,  the  result  of  the 
discount  of  a  note  for  Smith  and  Buchanan,*  and  by  the  llth 
of  September  Buchanan,  with  the  aid  of  his  accomplice, 
McCulloch,  had  loaned  himself  $798,301.77  on  stock  secu- 
rity.5 McCulloch  borrowed  $574,001.036  in  the  same  man- 
ner, though  he  was  absolutely  without  means,  and  George 
Williams  secured  $169, 833. 34,7  the  total  amount  owed  by 
the  three  together  on  bank  stock  securities  being  $1,542,- 
136. 14.8  These  notes,  moreover,  were  constantly  renewed, 

1 "  R.  L.  Colt  was  next  examined.  He  proved  ....  That  after  some  time  early 
in  August,  1817,  he  thinks  the  10th  or  llth,  no  stock  notes,  to  the  best  of  his  recollection 
and  belief,  were  ever  submitted  to  the  Board,  for  discount  or  renewal ;  until  some 
time  in  January,  1819,  when  an  order  of  the  Parent  Board  was  received,  forbidding 
them  to  be  made  without  the  consent  of  the  Directors :  And  that  on  making  enquiry 
at  the  Board,  on  the  subject  of  such  loans,  he  was  told  by  both  James  A.  Buchanan 
and  Jas.  W.  M'Culloh,  the  President  and  Cashier,  that  it  was  executive  business, 
with  which  he,  as  a  Director,  had  no  concern." — Conspiracy  Cases,  p.  48.  Also  testi- 
mony of  A.  B.  Bankson,  p.  46 ;  John  White,  p.  46 ;  Jas.  Beatty,  p.  47 ;  George  Hoffmann, 
p.  48;  John  Hoffmann,  John  McKiin,  Jr.,  Jos.  W.  Patterson,  p.  49;  Wm.  Gilmore, 
p.  50;  Thos.  Finley,  p.  119. 

2 Ibid.,  pp.23,  24,  by-laws  of  the  bank;  testimony  of  Baltimore  directors,  pp. 
119, 129, 130. 

3  76 id.,  p.  139.  *  Ibid.,  p.  29.  5  ibid.,  pp.  29-32. 

«  For  details,  ibid.,  pp.  33-7.  1  Ibid.,  pp.  37,  38. 

*Ibid.,  pp.  40,  41.  This  differs  slightly  from  the  figures  already  given,  because 
there  were  several  stock  loans  made  to  them  which  were  not  counted  as  being  for  the 


46  THE  SECOND  BANK  OP  THE  UNITED  STATES 

without  the  payment  of  interest,  and  without  the  knowledge 
or  consent  of  the  board;1  nor  did  their  loans  cease  when 
the  parties  were  absolutely  certain  that  they  were  ruined.2 
Thus  on  January  11,  1819,  the  stock  was  at  107,3  and  the 
loss  of  the  stock  company  by  this  decline  in  price,  counting 
in  brokerage,  commission,  and  other  incidental  charges,  was 
$1,444,074.  Yet  they  renewed  their  notes  and  added  to 
them.4 

Though  Buchanan  and  McCulloch  had  evaded  the  super- 
vision of  the  local  board  by  usurping  the  power  to  make 
stock  loans,  yet  the  loans  had  to  be  entered  on  the  books  of 
the  bank,  and  thus  the  chances  of  discovery  were  enhanced 
to  such  a  degree  that  continued  concealment  seemed  impos- 
sible, since  the  directors  had  the  right,  and  it  was  their  duty, 
to  examine  the  books.  Yet  these  immense  stock  loans  were 
recorded  and  caused  no  comment.5  Obviously  the  directors 
neglected  their  plain  duty,  though  it  must  be  remembered 
that  many  of  them  believed  that  they  had  no  authority  to 
inquire  into  the  business  of  loaning  on  stock.  Moreover, 
there  was  at  first  glance  little  ground  for  suspicion,  since 
the  loans  were  entered  on  the  books  merely  as  loans  on  stock, 
without  any  mention  of  what  the  stock  was,  how  much  it 
was,  or  in  what  manner  secured.8 

use  of  the  company.  Stock  loans  did  not  comprise  the  whole  of  their  debt.  They 
secured  loans  on  personal  security  for  small  amounts.  Each  overdrew  his  account, 
and  in  several  other  ways  added  minor  sums  to  the  great  mass  of  the  debt.  The 
whole  amounted  to  $497,723.40  (ibid.),  which,  added  to  the  sum  already  given,  made 
a  total  of  $1,982,098.66. 

i  Conspiracy  Cases,  pp.  29-39.  2  Ibid.,  pp.  68-71,  77-83. 

3  See  Colt's  statement,  ibid.,  p.  98. 

*  Harper's  argument,  ibid.,  pp.  193, 194. 

5 "They  [the  books]  no  doubt  disclosed  the  fact,  that  such  notes,  to  such 
amounts,  of  such  dates,  payable  at  such  periods,  and  drawn  and  endorsed  by  such 
persons,  had  been  discounted  for  the  Traversers,  as  stock  notes." — Idem,  ibid.,  p.  178. 

6  "  They  [the  books]  were  wholly  silent  on  all  these  heads.  This  is  fully  and  unde- 
niably proved,  by  the  present  Cashier  and  the  Clerks,  and  by  the  books  themselves 
now  lying  before  me,  and  open  as  they  have  been  for  a  fortnight,  day  by  day,  to  the 
inspection  of  the  Traversers  and  their  counsel.  They  simply  speak  of  the  notes  as 
stock  notes ;  but  make  no  mention  whatever  of  the  stock  pledged  ;  its  nature,  its 


ADMINISTRATION  OF  WILLIAM  JONES  47 

To  evade  the  vigilance  of  the  Baltimore  directors  was  a 
trifling  task ;  to  evade  that  of  the  central  board  was  none  at 
all.  Jones,  said  Crawford,  was  completely  in  the  possession 
of  the  Baltimoreans,  and  there  can  be  no  doubt  that  Cashier 
Smith  was  quite  as  much  so.  But  when  the  panic  fell,  in 
the  autumn  of  1818,  this  state  of  affairs  could  no  longer  con- 
tinue. On  the  20th  of  October  a  call  was  sent  out  from 
Philadelphia,  asking  for  lists  of  the  stock  loans  at  all  the 
branches.1  There  were  three  points  included  in  this  call,  on 
each  of  which  full  information  was  required:  (a)  a  separate 
list  of  notes  discounted  on  stock  security  was  to  be  for- 
warded to  Philadelphia;  (6)  with  the  names  of  the  drawers 
and  indorsers ;  (c)  and  a  description  of  the  stock  pledged. 
Discovery  stared  the  unhappy  wretches  in  the  face,  and  for 
a  moment  they  seemed  to  abandon  all  hope.  On  the  26th 
of  October  McCulloch  wrote  to  the  officers  at  Philadelphia, 
saying  that  the  information  desired  would  soon  be  forwarded.2 
It  seems  that  he  then  carried  to  Philadelphia  a  list  of  the 
stock  loans,  which  he  intended  to  present  to  the  board,  and 
which  would  have  revealed  at  once  in  all  its  nakedness  the 
fraud  which  had  been  practiced.  Cashier  Smith,  however, 
dissuaded  him  from  doing  this.3  He  then  returned  to  Balti- 
more, and  on  the  9th  of  November  sent  a  second  letter  to 
Philadelphia,4  which  was  intended  to  pave  the  way  for  a 
falsification  of  the  records  of  the  Baltimore  branch.  Loans, 

amount,  or  the  manner  in  which  the  pledge  was  secured.    All  these  matters  were 
within  the  sole  cognizance  of  the  Traversers,  Buchanan  and  M'Culloh,  as  President 
and  Cashier ;  and  to  the  latter  exclusively  belonged  the  custody  of  the  Stock  itself. 
All  this  is  undeniable."— Idem.    See  testimony  of  John  White,  ibid.,  p.  47. 
i/6id.,p.  27. 

2  "  I  have  directed  the  list  of  discounts  granted  here  upon  the  pledge  of  stock 
and  personal  security,  to  be  made  up,  and  as  soon  as  it  can  be  conveniently  fur- 
nished ;  it  shall  be  forwarded  to  you." — Ibid.,  p.  58. 

3  Testimony  of  D.  A.  Smith,  ibid.,  pp.  62,  63. 

4  "  I  am  preparing  a  list  of  borrowers  upon  stock  at  this  office,  ....  the  delay  in 
furnishing  this  list  correctly,  arises  from  a  necessity  to  examine  these  loans  for  some 
time  back,  as  entries  have  been  sometimes  debited  to  loans  on  stock,  which  should 
have  been  to  bills  on  personal  security,  and  vice  versa." — McCulloch  to  Smith,  ibid. 


48  THE  SECOND  BANK  OF  THE  UNITED  STATES 

he  asserted,  had  been  mistakenly  entered  as  loans  on  stock 
instead  of  as  loans  on  personal  security.1  McCulloch  fol- 
lowed up  his  letter  by  rectifying  the  presumably  false  entries. 
This  he  did  by  transferring  to  the  account  of  notes  on  per- 
sonal security  $852,683.64  from  the  stock  list,  and  of  course 
diminishing  that  list  by  this  amount.2  With  this  substitu- 
tion Buchanan  and  McCulloch  were  able  to  show  enough 
stock  to  secure  $645,400,  and  the  stock  list  thus  manufac- 
tured on  the  14th  of  November  showed  precisely  that 
amount  as  owed  by  them.3 

For  the  time  the  speculators  were  saved,  but  not  for  long. 
In  January  President  Jones  resigned,  and  steps  were  imme- 
diately taken  to  correct  abuses  everywhere,  and  especially  at 
Baltimore.  On  January  22,  1819,  an  order  was  issued  from 
the  bank  at  Philadelphia  forbidding  any  discount  or  renewal 
of  any  discount  on  the  security  of  stock  without  the  consent 
of  the  board  of  directors.4  This  put  an  end  to  any  further 
manipulation  of  the  funds  of  the  Baltimore  office  by  the 
president  and  cashier.  On  the  1st  of  February  another 

i "  The  court  will  recollect  that  the  books  have  been  produced  and  inspected : 
That  they  have  laid  on  the  table  three  weeks,  open  to  the  Traversers  and  their  Coun" 
sel :  .  .  .  .  and  that  no  attempt  has  been  made  on  the  part  of  the  Traversers,  to  point 
out  any  such  errors  as  this  entry  and  the  letter  of  November  9th  import,  nor  indeed  any 
intimation  that  such  errors  exist.  On  the  contrary  it  fully  appears,  by  the  inspec- 
tion of  the  books  themselves,  as  well  as  by  the  testimony  of  the  clerks  and  the  present 
Cashier,  that  no  such  errors  exist.  Thus  it  is  established,  and  indeed  admitted,  that 
the  entry  is  absolutely  false." — Harper's  Argument,  Conspiracy  Cases,  p.  212.  For 
the  evidence  see  pp.  67-73,  testimony  of  clerk  and  the  genuine  stock  list  of  Nov.  13. 

2 "Mr.  Butter  then  proved,  that  on  the  14th  of  November,  1818,  James  W. 
M'Culloh  wrote  and  handed  to  him,  an  entry  in  relation  to  loans  on  stock,  with 
directions  to  enter  it  in  the  day  book  of  that  day,  which  he  accordingly  did ;  from 
whence  it  was  posted  into  the  ledger  on  the  same  day,  and  made  part  of  the  stock 
account  of  that  day." — Ibid,  p.  64. 

3 See  the  list,  ibid.,  pp.  60-62.  The  sums  given  are  as  follows:  Smith  & 
Buchanan,  $97,875  and  $137,500;  George  Williams,  $221,875  and  $188,150;  total,  $645,400. 
Whether  it  was  ever  presented  to  the  directors  at  Philadelphia  is  doubtful,  but 
probable,  since  a  letter  of  precisely  the  same  date  mentions  that  a  stock  list  has 
been  forwarded.  See  two  letters  of  this  date.  —  Ibid.,  pp.  58,  59.  Both  are  from 
McCulloch.  In  one  he  says .  "  I  send  you  herein  a  statement  of  the  existing  loans 
made  at  this  office,  upon  pledged  stock  and  personal  security." 

</6id.,p.  27. 


49 


resolution  prohibited  any  further  new  loans  on  stock.1  On 
the  19th  of  February  came  an  order  directed  to  Baltimore 
demanding  a  specific  account  of  the  loans  at  the  office  made 
on  stock  security.2  Concealment  could  be  continued  but  a 
little  longer.3  Before  the  16th  of  March  the  gentlemen  had 
confessed  that  they  could  not  pay  their  debts,  and  about 
the  same  time  they  handed  in  a  paper  to  the  directors  at 
Philadelphia  purporting  to  show  precisely  how  their  affairs 
stood.4 

In  addition  to  these  acts  of  the  speculators  as  a  body, 
each  of  them  kept  his  account  continually  overdrawn,  even 
after  they  knew  that  they  were  ruined  and  that  exposure 
must  be  at  hand.5  The  mismanagement  of  the  branch  was 
flagrant  in  this  respect,  for  when  McCulloch  was  removed 
the  sums  overdrawn  footed  up  $200,759.60.  6  Nor  was  this 
all,  for  the  cashier  seems  to  have  made  loans  without  the 
knowledge  of  anyone  else,  and  to  have  kept  no  record  of  the 
sums.  The  amount  so  loaned  was  over  $84,000.  7  Finally, 
the  first  teller,  J.  S.  LaReintrie,  was  found  to  be  a  defaulter, 
to  the  extent  of  $50,000." 

Thus,  by  arrogating  to  themselves  the  sole  right  to  dis- 
count loans  on  pledges  of  stock,  by  indorsing  for  each  other, 
by  lying  to  the  local  board  of  directors,  by  false  entries  in 
the  books  of  the  branch,  by  false  reports  to  the  bank  at 


2  ibid. 

3  They,  however,  attempted  further  deception  by  handing  in  another  fraudulent 
stock  list  and  another  fraudulent  personal  security  list  on  March  8.  The  false 
stock  list  of  March  8  gives  the  debts  of  the  parties  on  stock  security  as  follows: 
Smith  &  Buchanan,  $97,875  and  $137,500;  Williams,  $221,875  and  $188,150;  total,  $645,400. 
McCulloch  was  credited  with  a  loan  on  stock  of  $3,400,  but  this  was  no  part  of  the 
so-called  stock  loan.  The  true  list  of  the  same  date  showed  them  debtors  for  the 
following  sums:  McCulloch,  $592,201.01;  Smith  &  Buchanan,  $870,801.77;  Williams, 
$169,83334;  total  (omitting  $3,400  on  McCulloch's  private  account),  $1,629,436,12.— 
Ibid.,  pp.  77-83.  The  false  discount  list,  pp.  84,  85. 

*  Ibid.,  pp.  91,  92,  Paper  X.     5  "An  Exhibit  of  Losses  Sustained,"  etc.,  ibid.,  p.  12. 

6  Of  this  sum  Buchanan  was  debtor  for  $39,916.24,  McCulloch  for  $28,944.54,  and 
Williams  for  $13,339.12.—  Ibid. 

^  Ibid.,  p.  11.  sibid.,  p.  12. 


50  THE  SECOND  BANK  OF  THE  UNITED  STATES 

Philadelphia,  the  speculation  was  kept  going.  But  it  was 
impossible  that  it  should  continue  when  once  the  panic  of 
1818-19  swept  over  the  country.  When  the  crash  came, 
the  parties  to  this  shameless  fraud  failed  to  pay  $1*401,- 
685.32  of  their  debts.1 

i  Smith  &  Buchanan's  debts  unsecured        ....    $344,212.43 

J.  W.  McCulloch's  debts 429,049.80 

Geo.  Williams's  debts 628,423.09 

$1,401,685.32 
— "  Exhibition  of  Losses,"  Conspiracy  Cases,  pp.  21-4. 


CHAPTER  III 

THE  ATTEMPT  TO  SAVE  THE  BANK  UNDER  JONES 

WHEN  the  conviction  that  the  bank  was  in  straits  finally 
took  possession  of  the  directory  at  Philadelphia,  strenuous 
efforts  were  made  to  rescue  it.  These  began  July  20,  1818, 
when  it  was  resolved  to  curtail  $5,000,000  in  discounts  at 
Philadelphia,  Baltimore,  Richmond,  and  Norfolk.  In  addi- 
tion, the  Washington  office  was  instructed  to  call  for  the 
payment  of  balances  due  by  the  other  banks  in  the  District, 
and  the  Cincinnati  office  to  collect  the  balances  due  from 
the  Cincinnati  banks  at  the  rate  of  20  per  cent,  a  month.1 
The  reduction  was  to  be  mainly  in  the  South.  In  the  North 
and  East,  outside  of  Philadelphia,  none  was  expected.2  At 
this  moment  the  immediate  demand  liabilities  of  the  bank 
were  $22,372,000,  the  specie  fund  to  meet  them  $2,357,000. 
It  was  soon  evident  that  these  measures  would  not  be 
effective  in  putting  a  period  to  the  most  serious  drain  upon 
the  bank's  resources,  namely,  the  drafts  of  the  southern 
and  western  offices.  Consequently,  on  the  28th  of  August 

i  (1)  "That  the  reduction  of  the  discounts  at  this  bank,  and  its  offices  at  Balti- 
more, Richmond  and  Norfolk,  be  forthwith  commenced,  and  continued  at  the  average 
rate  of  at  least  twelve  and  a  half  per  cent,  on  the  amount  of  the  income  on  each  dis- 
count day."  Philadelphia,  $2,000,000;  Baltimore,  $2,000,000;  Richmond,  $700,000; 
Norfolk,  $300,000. 

(2)  "  That  the  president  be  required  to  demand  of  the  Bank  of  Columbia,  .... 
a  satisfactory  assurance  that  the  large  balance  which  is  now  and  has  long  been  due 
from  that  bank  to  this  institution  be  discharged,  ....  so  that  the  whole  shall  be 
liquidated  by  the  15th  day  of  October  next ;  .  .  .  . 

(3)  "  That  the  cashier  of  the  office  at  Washington  city  be  directed  to  demand 
payment  of  the  balances  which  may  be  due  to  that  office  by  the  other  banks  of  the 
District  of  Columbia,  .... 

(4)  "  That  the  cashier  of  the  office  at  Cincinnati  be  directed  to  demand  the 
reduction  of  the  balances  which  may  be  due  by  the  State  banks  in  that  place,  at  the 
rate  of  at  least  20  per  cent,  per  month,  until  the  whole  shall  be    extinguished." — 
F.,  Vol.  Ill,  p.  387. 

2CHEVE8,  p.  14;  NlLES,  Vol.  XXIII,  p.  90. 

51 


52  THE  SECOND  BANK  OP  THE  UNITED  STATES 

a  second  series  of  resolutions  was  adopted  forbidding  the 
offices  to  receive  any  notes  but  their  own,  except  in  pay- 
ments to  the  United  States,  prohibiting  the  further  sale  of 
drafts  at  par,  and  restricting  the  purchase  of  bills  of  domestic 
exchange.1  If  these  orders  were  faithfully  executed,  the 
bank  would  be  relieved  of  its  most  formidable  difficulties. 

In  October  it  was  found  that  the  attempt  to  curtail  had 
not  been  as  successful  as  desired,  though  a  material  reduc- 
tion had  been  attained.2  The  branches  in  the  South  failed 
to  reduce  to  the  amount  assigned  by  $1,077,500.  A  com- 
mittee of  the  bank  reporting  October  30,  1818,  therefore 
advised  that  these  offices  be  required  to  complete  the  reduc- 
tion, and  that  $1,500,000  more  in  discounts  should  be 
curtailed:  $100,000  at  Middletown,  Conn.,  $400,000  at  Rich- 
mond, and  $1,000,000  at  Baltimore.  Once  more  the  bulk 
of  the  reduction  was  to  fall  upon  the  South,  and  particularly 
upon  Baltimore,  which  had  already  been  called  upon  for  a 
reduction  of  $2,000,000  and  had  failed  to  make  that  reduc- 
tion by  $763,000.  In  addition,  the  orders  of  the  30th  of 
October  prohibited  the  offices  from  drawing  on  each  other; 
called  upon  the  southern  and  western  branches  for  $700,000 
in  specie;  authorized  President  Jones  to  arrange  for  the 
importation  of  $1,500,000  more;  forbade  the  offices'  taking 
the  notes  of  any  banks  which  did  not  redeem  them  in  specie 
on  demand ;  and  insisted  that  no  further  credits  be  given  to 
the  Cincinnati  banks  until  the  balances  already  due  were  dis- 
charged.3 Nothing  could  proclaim  louder  the  distress  of  the 
bank  than  this  report.  Nor,  if  it  were  obeyed,  could  anything 

I.F.,  Vol.  Ill,  pp.  325,  326. 

2  In  discounts  the  reduction  was  $4,252,441.17;  foreign  exchange  had  been 
diminished  $302,472.10,  and  funded  debt  had  been  sold  to  the  amount  of  $2,005,376.48. 

3(1)  "That  the  President  be  authorized  and  requested  to  order  the  additional 
sum  of  one  million  and  a  half  of  dollars,  in  French  coin,  to  be  shipped  on  account  of 
the  bank. 

(2)  "  That  the  branches  which  have  not  reduced  their  discounts,  as  required  by 
the  resolution  of  the  20th  of  July  last,  be  required  to  complete  said  reductions. 

(3)  "That  in  addition  ....  the  following  offices  be  required  to  reduce  their 


ATTEMPT  TO  SAVE  THE  BANK  UNDER  JONES  53 

be  more  effective,  since  it  would  not  only  directly  reduce 
discounts,  but  indirectly,  by  the  prohibition  of  selling  drafts, 
go  far  toward  putting  a  stop  to  all  the  southern  and  western 
business.  On  the  other  hand,  it  spelled  ruin  for  thousands, 
and,  had  the  bank  been  strong,  would  have  been  the  most 
damning  evidence  of  a  total  incapacity  to  handle  a  monetary 
stringency  as  it  should  be  handled.  What  the  country 
had  a  right  to  expect  at  such  a  time  from  a  bank  holding 
the  position  held  by  the  Bank  of  the  United  States  was  an 
extension  of  credit,  the  granting  at  a  fair  rate  of  all  legiti- 
mate demands  for  loans. 

The  measures  seemed  to  be  effective.  In  March,  1819, 
total  loans  had  fallen  to  $40,640,236.65,  a  reduction  of  over 
$3,900,000  since  October,  almost  entirely  in  discounts. 
The  whole  reduction  from  July  20,  when  the  contraction 
began,  was  $7,505,760.55.  The  discounts  had  been  espe- 
cially aimed  at,  the  particular  effort  being  to  reduce  them 
by  $7,000,000,  and  the  difference  in  this  item  in  the  eight 
months  of  contraction  was  $6,530,159.49.  The  circulation 

discounts  at  the  average  rate  of  twelve  and  a  half  per  cent,  each  discount  day." 
(Names  of  offices  and  sums  follow.) 

(4)  (An  order  to  Charleston  to  hold  specie  ready  for  Savannah,  and  to  ship 
$150,000  to  Philadelphia.) 

(5)  "  That  the  offices  reciprocally  refrain  from  drawing  on  each  other,  or  upon 
this  bank,  until  further  orders." 

(6)  (Cashier  to  draw  for  specie.) 

"  Richmond,  in  specie  or  bills  at  sight  on  this  city,  New  York  or  Boston  $  50,000 

Lexington,  in  specie   -------------  100,000 

Louisville,  in  specie       .„----------  100,000 

Cincinnati,  in  specie 50,000 

Pittsburg,  in  specie - 50,000 

Chillicothe,  in  specie  ----- --  100,000 

Fayetteville,  in  specie 100,000 

Total $550,000" 

(7)  (Only  notes  paid  on  demand  in  specie,  to  be  received  everywhere.    Not  to 
credit  as  cash  notes  of  banks  which  shall  be  indebted  to  the  bank  after  demand  for 
payment  has  been  made.) 

(8)  "  That  when  the  banks  at  Cincinnati  shall  have  made  arrangements  with 
the  cashier  of  this  bank  for  the  payment  of  their  respective  debts,  the  cashier  of 
the  office  at  Cincinnati  may  receive  the  notes  of  any  such  bank  as  cash,  provided 
the  said  bank  shall  thereafter  pay  its  notes  in   specie  on  demand." — Ibid.,  pp. 
388,389. 


54  THE  SECOND  BANK  OP  THE  UNITED  STATES 

fell  away  at  a  proportionate  rate,  the  reduction  being 
$2,500,000  from  July,  1818,  to  January,  1819.  To  secure 
this  decrease  in  circulation  the  most  stringent  measures  had 
been  adopted,  culminating  in  the  order  of  August  28,  which 
forbade  the  offices  to  take  any  notes  but  their  own,  even  on 
deposit.1 

In  appearance,  therefore,  the  bank  had  done  what  it 
wished  to  do,  but  actually  it  had  done  nothing  of  the  sort. 
The  attempt  had  been  directed  against  the  southern  and 
western  branches,  and  here  it  was  almost  absolutely  futile. 
In  fact,  the  western  offices,  instead  of  diminishing,  increased 
their  loans  to  the  extent  of  $500,000.2  Moreover,  loans  in 
the  West  frequently  changed  their  form  only:  the  branches 
ceased  to  discount,  but  increased  their  purchases  of  bills  of 
exchange,  in  most  cases  as  a  species  of  renewal  of  notes  or 
bills  drawn  on  them,3  and  frequently  this  change  resulted  in 
transforming  an  interest-paying  debt  into  a  non-interest- 
paying  one.*  In  addition,  the  southern  and  western  offices 
could  not  be  "restrained  from  issuing  their  notes,  which 
they  did  most  profusely." 5 

The  curtailment,  therefore,  fell  almost  entirely  upon  the 
offices  in  the  East,  where  curtailment  was  not  desirable. 
Philadelphia  alone  reduced  to  the  extent  of  $3,600,000,6  or 

1  '  Sir :  I  am  directed  to  inform  yon  that  notes  of  this  bank  which  are  made  pay- 
able at  its  several  offices  of  discount  and  deposite  will  not  be  received  at  this  bank 
after  this  day,  except  in  payment  of  debts  due  the  United  States.  Such  notes,  how- 
ever, of  the  offices  as  your  bank  may  have  received  during  this  day,  will  be  received 
in  exchange  to-morrow  morning." — J.  Smith,  cashier,  circular  to  city  banks ;  issued 
to  the  offices  also,  F.,  Vol.  Ill,  p.  367.  The  office  at  Boston  had  ceased  receiving 
southern  branch  notes  in  March  (Gray  to  Jones,  March  19, 1818,  ibid.,  pp.  324, 325),  and 
the  offices  in  Savannah,  New  Orleans,  and  Charleston  had  never  taken  any  but  their 
own  notes. — Report  of  committee  of  August  26, 1818,  ibid.,  p.  325. 

2CHEVES,  p.  15;  NlLES,  Vol.  XXIII,  p.  90. 

3  Ibid.  These  were  the  so-called  race-horse  bills,  which  ran  from  office  to  office 
without  being  paid. 

*  "The  curtailments  in  many  instances  resulted  merely  in  a  change  of  debts 
bearing  interest  for  debts  due  by  local  banks,  or  the  notes  of  local  banks,  on  neither 
of  which  was  interest  received."— Ibid. 

5  Ibid.  6  CHEVES,  p.  14,  and  MILES,  ibid. 


ATTEMPT  TO  SAVE  THE  BANK  UNDER  JONES  55 

over  half  the  entire  reduction  in  discounts;  Boston  and 
New  York,  which  were  not  required  to  reduce,  were  forced 
to  follow  the  example  of  Philadelphia,  the  discounts  at  Bos- 
ton in  April,  1819,  being  only  $94,584.37.1  In  like  manner 
it  was  the  eastern  offices  which  reduced  circulation,  the  notes 
of  the  western  banks  having  to  be  redeemed  in  the  East.2 
The  result  was  that  the  bank  was  actually  worse  off  than 
when  it  began  the  reduction,  because  the  offices  which  needed 
strengthening  became  weaker,  while  the  branches  of  the  South 
and  West  could  not  be  checked.  After  "  these  immense  and 
rapid  curtailments,"  says  Cheves,  "the  most  sensible  and 
vital  points  (Philadelphia,  New  York  and  Boston)  were 
infinitely  in  worse  condition  than  when  the  remedy  was 
devised." 8  The  business  of  the  eastern  offices  was  almost 
destroyed.  On  the  19th  of  March,  1818,  the  Boston  office 
had  ceased  receiving  southern  branch  notes.  It  had  made 
no  discounts  worth  mentioning  for  many  weeks,  its  whole 
time  and  capital  being  employed  in  the  redemption  of  south- 
ern branch  paper.4  The  office  at  New  York  suffered  in  the 
same  manner.  Both  branches  were  depleted  of  their  specie, 
though  large  quantities  of  the  precious  metals  were  sent  to 
them.5  At  times  their  capital  was  "less  than  nothing."6 
The  general  condition  of  the  northern  branches  corresponded 
to  that  of  the  offices  at  Boston  and  New  York.  The  entire 
capital  of  the  institution  was  rapidly  being  shifted  to  the 
South  and  West.  Out  of  the  total  capital  stock  of  $35,000,- 
000  the  office  at  Baltimore  held  $5,646,000  in  May,  1819; 

1  CHEVES,  p.  15,  and  MILES,  ibid. 

2  From  Sept.  1, 1818,  to  May  24, 1819,  $5,700,000  in  southern  and  western  notes  had 
been  received  at  the  eastern  offices,  "  nearly  all  ....  at  Philadelphia,  New  York, 
and  Boston."— Cheves  to  Crawford,  May  24, 1819,  F.,  Vol.  IV,  p.  881. 

3  CHEVES,  pp.  14, 15;  also  NILES,  Vol.  XXIII,  p.  90. 

*  Letter  of  President  Gray  to  Jones,  March  19, 1818,  J7.,  Vol,  III,  p.  324. 
5  Ibid.,  p.  331.    Amount  furnished  office  at  New  York  from  May,  1817,  to  Dec.,  1818, 
$6,293,392.01 ;  to  office  at  Boston  from  Jan.,  1817,  to  Dec.,  1818,  $1,622,800.09. 

«  Memorial  of  the  bank  directors,  Dec.  7, 1820,  ibid.,  p.  589. 


56  THE  SECOND  BANK  OP  THE  UNITED  STATES 

Richmond,  $1,760,000;  Savannah,  $1,420,000,  and  Charles- 
ton, $1,935,000,  while  the  offices  in  the  West  were  in  an 
equally  prosperous  condition,  controlling  a  capital  enor- 
mously out  of  proportion  to  their  legitimate  needs.  Lex- 
ington had  $1,502,000,  Louisville  $1,129,000,  and  Cincin- 
nati $2,400,000,  while  New  York  had  a  capital  of  $245,000, 
and  Boston  had  none  whatever.1 

From  what  has  already  been  stated  of  the  manner  in 
which  the  specie  of  the  bank  was  drained  from  it  by  the 
state  banks  and  speculators,  it  will  easily  be  conjectured 
that  the  frantic  attempts  to  secure  specie  would  be  of  little 
avail.  During  the  eight  months  of  contraction  the  bank 
could  procure  after  the  most  strenuous  efforts  only  $2,617,- 
440.63,  while  from  the  beginning  of  its  existence  to  the  5th 
of  December,  1818,  it  imported  $6,500,458.42.  After  that 
date  no  more  could  be  secured.  To  get  this  specie  over 
half  a  million  dollars  was  expended,2  and  this  half  million 
represented  only  the  direct  cost  of  buying  and  importing. 
Cheves  declared  that  a  debt  of  $1,586,345.47  owed  by  the 
bank  in  1818  grew  "principally  if  not  entirely"  out  of  its 
specie  operations.3  The  only  result  of  any  consequence, 
therefore,  was  to  diminish  the  bank's  resources  by  over 

i  Capital  of  the  bank,  showing  the  effect  of  the  note  issues  and  drafts  of  South 
and  West,  May,  1819: 


Portsmouth 

-       -       -       $  117,678.70 

Savannah 

$1,420,543.45 

Providence 

-       -       -       335,208.54 

New  Orleans 

-     1,664,596.47 

Middletown 

255,985.11 

Lexington 

1,502,388.44 

New  York 

245,287.81 

Cincinnati    - 

-     2,400,987-30 

Baltimore    - 

-       -       -         5,646,325.28 

Louisville 

1,129,009.00 

Washington     - 

-       -       -       555,737.97 

Chillicothe  - 

649,858.83 

Richmond    - 

1,760,562.88 

Pittsburg  ... 

769,031.36 

Norfolk    -       - 

861,764.16 

Philadelphia 

-   13,418,742.961 

Fayetteville 

-       -           677,963.81 

Deduct  due  to  Boston 

372,825.79  / 

Charleston 

-     1,935,042.35 

$13,045,917.17 

Tnt.nl     . 

$34.973.828.63 

The  capital  given  for  Philadelphia  was  merely  nominal.—  P.,  Vol.  Ill,  p.  593; 
CHEVES,  p.  34,  Appendix  II. 

2 F .,  Vol.  Ill,  pp.  338,  339.    Cost  $525,297.35. 

3  Exposition,  p.  15;  also  NILES,  Vol.  XXIII,  p.  90. 


ATTEMPT  TO  SAVE  THE  BANK  UNDEB  JONES  57 

$2,000,000.  The  sale  of  public  stock  was  an  operation  of  a 
similar  nature.  Specie  purchases  and  the  sale  of  United 
States  stock  ended  by  reducing  "  the  productive  capital  of 
the  Bank,  within  the  period  of  eight  months,"  by  "eight 
millions  of  dollars  and  upwards." l  The  efforts  to  secure 
balances  due  from  the  state  banks  were  perhaps  more  hope- 
less still.  In  the  West  these  banks  when  called  upon 
remonstrated,  and  when  pressed  were  forced  to  declare  their 
insolvency.  State  banks  had  nothing  with  which  to  pay, 
and  hopes  of  relief  from  them  were  vain  from  the  begin- 
ning. 

Such  were  the  efforts  of  Jones  and  his  coadjutors  to 
secure  the  bank,  and  such  were  the  results.  After  a  reduction 
of  about  $7,000,000,  the  offices  in  the  North  and  East  were 
almost  prostrated;  the  specie  funds  there  had  vanished; 
its  debts  abroad  had  been  increased  enormously ;  its  imme- 
diate demand  liabilities  were  in  excess  of  $13,168,000,  its 
means  of  meeting  them  only  $2,666,000;  the  capital  had 
been  shifted  to  the  South  and  West,  and  was  tied  up  there 
in  notes  and  bills  constantly  renewed;  debts  could  not  be 
collected;  the  orders  of  the  central  board  could  not  be 
enforced  upon  the  branches;  and  at  Baltimore  a  gang  of 
thieves  was  looting  the  office  and  striving  with  might 
and  main  to  bring  about  a  suspension  of  specie  payments. 
The  final  blow  was  given  when  the  government  demanded 
$2,000,000  of  its  deposits  in  specie  in  order  to  make  a  pay- 
ment in  redemption  of  the  Louisiana  purchase  stock.2  For 
a  moment  the  bank  trembled  on  the  verge  of  insolvency: 
"the  Directors  ....  did  not  know  what  answer  to  give — " 
but  finally  made  an  arrangement  whereby  they  furnished 
bills  on  London  in  lieu  of  the  specie,  a  substitution  "  which 
saved  the  Bank." 3  But  no  one  conversant  with  its  situation 

i  CHBVES,  p.  16,  and  NILES,  ibid.  2  Redeemable  Oct.  21, 1818. 

3  James  C.  Fisher  to  Rufus  King,  Jan.  30,  1819,  Life  and  Correspondence  of 
KM/MS  King,  Vol.  VI,  p.  201. 


58  THE  SECOND  BANK  OF  THE  UNITED  STATES 

expected  that  it  would  be  able  much  longer  to  weather  the 
storm. 

The  stringency  of  1818  at  once  brought  down  the  popu- 
lar wrath  upon  the  bank,  and  popular  feeling  was  soon  felt 
and  reflected  in  Congress.  On  the  25th  of  November,  1818, 
John  C.  Spencer,  a  representative  from  New  York,  intro- 
duced resolutions  demanding  investigation  by  a  committee  of 
the  House.1  After  a  brief  but  spirited  debate,  these  were 
adopted  on  the  30th,2  and  the  committee  was  appointed  with 
Spencer  as  its  chairman.3  The  committee  investigated 
laboriously,  collected  a  vast  amount  of  formless  material, 
and  on  the  16th  of  January,  1819,  reported,  censuring  the 
managers  of  the  bank  for  mismanagement,  speculation,  and 
violations  of  the  charter.  These  violations  consisted  in  buy- 
ing $2,000,000  of  the  public  stock  for  the  government  of 
the  United  States,  in  assisting  the  stockholders  to  evade 
payment  of  the  coin  and  funded-debt  part  of  the  second 
instalment,  in  paying  dividends  to  stockholders  who  had 
not  paid  up  their  subscriptions,  and  in  allowing  stockholders 
to  cast  more  than  thirty  votes  in  the  first  and  second  elec- 
tions for  directors.* 

Despite  the  really  flagrant  mismanagement  and  fraud  at 
the  bank,  and  despite  the  amount  of  this  which  was  revealed 
by  the  committee,  the  report  was  exceedingly  weak,  being 
constructed  hastily  and  imperfectly,  contradictory  in  its 
charges,  and  in  places  incomprehensible.  The  author  of  it 
had  too  feeble  a  grasp  on  the  complicated  questions  before 
him,  and  consequently  failed  to  make  the  most  of  his 
advantages.  He  felt  called  upon,  indeed,  to  apologize  for 
the  report,  admitting  inaccuracy  and  confusion.5  The 

l  A.  ofC.,  15th  Cong.,  2d  Sess.,  Vol.  Ill,  p.  317.        « Ibid.,  p.  335.        *Ibid.,  p.  552. 

3  J.  C.  Spencer,  New  York ;  William  Lowndes,  South  Carolina ;  John  Tyler,  Vir- 
ginia; Harwell  Bassett,  Virginia;  Louis  McLane,  Delaware,  constituted  the  com- 
mittee.—/^., pp.  335,  340. 

5  "  Mr.  S.  proceeded  to  make  explanations  of  some  expressions  in  the  report. 
The  remark,  that  '  the  principal  business  of  the  bank  certainly  has  been  to  discount 


ATTEMPT  TO  SAVE  THE  BANK  UNDER  JONES  59 

minority  of  the  committee,  the  only  members  of  it  who 
possessed  anything  like  an  adequate  knowledge  of  banking 
and  currency  questions,  clearly  demonstrated  that  the  charges 
of  charter  violation  were  of  slight  moment.  Thus  in  the 
purchase  of  government  stock  the  bank  had  acted  as  agent 
for  the  government,  and  consequently  had  committed  no 
breach  of  the  charter.1  The  failure  in  respect  to  compelling 
the  payment  in  specie  and  funded  debt  for  the  second  instal- 
ment was  regrettable ,  but  it  was  not  a  violation  of  the  char- 
ter, was  probably  inevitable,  and  had  been  condoned  by 
Congress  in  advance.2  The  payment  of  dividends  to  delin- 
quent stockholders  was  for  trifling  amounts,  and  made  by 
subordinate  officers  of  the  bank  without  the  knowledge  or 
consent  of  the  central  board.3  The  bank  had  no  control  of 
the  judges  of  election  who  had  permitted  the  casting  of 
more  than  the  legal  number  of  votes,  and  there  was  no 
method  specified  in  the  charter  by  which  these  judges  could 
hinder  such  violation.*  In  explaining  the  mismanagement 
of  the  bank's  affairs  its  supporters  were  not  so  successful, 
but  they  forcibly  argued  that  these  acts  were  the  result  of 
ignorance,  or  of  a  difference  of  opinion  with  regard  to  cor- 

on  notes  secured  by  a  pledge  of  stock,'  was  liable  to  misconstruction.  The  expres- 
sion used  does  not  convey  the  meaning  of  the  committee ;  it  was  either  an  inadver- 
tence in  the  draught,  or  an  error  in  copying ;  .  .  .  .  and  it  was  intended  to  confine 
the  remark  to  the  business  of  the  bank  at  Philadelphia,  ....  With  regard  to  the 
expression,  in  the.  close  of  the  report,  that, '  whatever  differences  of  opinion  can 
exist  among  them  (the  committee)  as  to  the  result  and  inferences  to  be  drawn  from 
the  facts  stated,  they  unanimously  concur  in  giving  to  the  preceding  statements  of 
facts,  and  abstracts  of  documents  their  sanction.'  Mr.  S.  observed  that  he  thought 
the  expression  sufficiently  precise,  but  he  understood  it  was  liable  to  a  misconstruc- 
tion. When  inferences  were  mingled  with  facts,  the  unanimous  sanction  did  not 
extend  to  these  inferences ;  but  that,  in  all  cases  wherever  a  fact  was  definitely 
stated,  the  committee  meant  to  sanction  it.  Mr.  S.  remarked,  that  the  report  had 
been  prepared  at  a  time  of  severe  indisposition,  and  when  the  committee  had  been 
fatigued  and  almost  exhausted  with  labor,  and  he  should  not  be  surprised  if  many 
erroneous  expressions  were  found  in  it." — Ibid.,  Vol.  IV,  p.  1241. 

1  LOWNDES,  pp.  1305, 1306 ;  McLANE,  pp.  1339, 1340. 

2  Ibid.,  LOWNDES,  pp.  1306, 1307;  McLANE,  pp.  1340-43;  SERGEANT,  pp.  1389-91. 

3  Ibid.,  LOWNDES,  pp.  1308, 1309 ;  SERGEANT,  p.  1391.    The  sum  was  only  $1,460. 

*  I  hid.,  pp.  1344, 1345, 1391, 1392.    See  the  summary  of  all  these  arguments  in  the 
pamphlet  by  AEGLES. 


60  THE  SECOND  BANK  OP  THE  UNITED  STATES 

rect  policy,  and  consequently  did  not  establish  criminality. 
Indeed,  criminality  was  not  charged,  the  Baltimore  frauds 
being  unknown  until  later.  Under  the  circumstances  it  was 
urged  that  the  policy  to  be  pursued  should  be  that  of  cor- 
recting abuses,  not  the  destruction  of  the  ignorant  and  inno- 
cent offender. 

So  complete  was  the  victory  of  the  bank's  advocates  in 
Congress  that  neither  house  could  be  persuaded  to  take  any 
step  except  that  of  passing  an  act  additional  to  the  charter 
by  which  in  the  future  it  would  be  impossible  for  stockhold- 
ers to  cast  more  votes  than  they  were  entitled  to  cast.1  The 
House  rejected,  by  large  majorities,  motions  to  sue  out  a 
scire  facias  and  to  repeal  the  charter,  besides  a  number  of 
others  contemplating  less  stringent  measures.2  The  Senate 
did  nothing  until  January,  1820,  when  it  decidedly  repelled 
resolutions  to  compel  the  bank  to  secure  the  consent  of  the 
states  for  the  establishment  of  branches  and  to  expose  its 
accounts  with  private  individuals.3 

The  investigation  of  1819  had  its  results,  however:  the 
stock  of  the  bank  immediately  fell  below  par;4  President 
Jones,  entirely  discredited,  fled  in  affright  from  the  bank, 
and  on  the  25th  of  January,  1819,  James  C.  Fisher  became 
president  pro  tempore,  until  a  man  could  be  found  to  save 
the  wreck.5 

Fortunate  would  it  have  been  for  the  Bank  of  the  United 
States  had  it  been  compelled  to  undergo  no  more  serious 
punishment,  but  the  consequences  of  mismanagement  and 
crime  were  to  be  severely  felt  for  the  rest  of  its  exist- 
ence, not  only  in  the  depletion  of  its  capital,  but  even  more 

1  A.  of  C.,  15th  Cong.,  2d  Sess.,  Vol.  IV,  p.  2522. 

2/6id.,  p.  1409.  Only  28  ayes  for  the  scire  facias.  See  for  measures  proposed 
ibid.,  Vol.  Ill,  pp.  922,  923;  Vol.  IV,  pp.  1411-16. 

3 Ibid.,  16th  Cong.,  1st  Sess.,  Vol.  I,  pp.  58-68.    Vote,  24  to  12,  Jan.  4, 1820. 
*  To  93  at  Philadelphia ;  97  at  New  York.—  NILES,  Vol.  XV,  p.  401. 
5  F.,  Vol.  IV,  p.  868,  and  NILES,  Vol.  XV,  p.  417. 


ATTEMPT  TO  SAVE  THE  BANK  UNDER  JONES  61 

seriously  in  the  hatred  and  hostility  of  the  people.  The 
almost  universal  conception  of  the  situation  in  1818-19  is 
summarized  by  Gouge  in  a  single  sentence:  "The  Bank  was 
saved  and  the  people  were  ruined." '  The  evidence  of  this 
conviction  is  apparent  in  Niles,  who  breathed  nothing  but 
threatenings  and  slaughter  against  all  banks,  but  especially 
against  the  Bank  of  the  United  States,  upon  which  he 
directed  the  whole  weight  of  his  clumsy  artillery,  declaring 
that  it  had  degenerated  into  a  machine  for  the  shaving  of 
notes  and  the  oppression  of  the  middle  classes,  and  that  it 
had  caused  the  panic.  Its  curtailments  had,  indeed,  precipi- 
tated the  panic,  for  which,  however,  it  was  hardly  more 
responsible  than  was  Noah  for  the  flood.  The  popular  bit- 
terness was  infinitely  increased  by  the  restrictive  orders 
which  compelled  the  payment  of  debts  precisely  when  it  was 
most  difficult  to  pay  them,  the  climax  of  dissatisfaction  being 
reached  on  August  28,  1818,  when  the  bank  issued  its  order 
to  the  offices  to  cease  receiving  each  other's  notes.  The 
measure  was  one  for  which  the  country  was  quite  unpre- 
pared, and  occasioned  suffering  and  embarrassment.  Notes 
of  distant  branches  were  current  only  at  a  discount,  and 
Niles  complains  bitterly  of  the  inconveniences  imposed  upon 
individuals,  testifying  to  his  own,  when,  with  "more  than 
one  hundred  dollars  in  small  notes  of  the  Bank  of  the  United 
States "  in  his  pocket,  he  "  could  not  pay  the  postage  of  a 
few  letters."2 

The  keenest  distress  fell  upon  the  West.  In  that  section 
there  never  existed  the  slightest  justification  for  the  prepos- 
terously large  loans  of  the  bank,  and,  as  the  state  banks  had 
been  equally  generous,  the  inflation  and  over-trading  were 
unparalleled.  Worse  yet,  much  of  the  indebtedness  had 
been  created  by  loans  to  farmers,  who  had  no  security  to 

1  Cobbett's  edition  of  1833,  p.  71. 

2  NILES,  Vol.  XV,  p.  61,  Sept.  19,  1818.    The  notes  depreciated  slightly,  about 
%  of  1  per  cent.— LOWNDES,  A.  of  C.,  15th  Cong.,  2d  Sess.,  Vol.  IV,  p.  1301. 


62  THE  SECOND  BANK  OP  THE  UNITED  STATES 

offer  excepting  mortgages  on  real  estate,  absurdly  overvalued, 
and  absolutely  unsalable  during  a  commercial  crisis.  A 
moment's  reflection  should  have  convinced  anyone  that  these 
new  and  insignificant  towns  of  the  West  could  not  possibly 
pay  debts  as  vast  as  those  contracted  in  New  York  and  Bos- 
ton, and  should  never  have  been  permitted  to  borrow  such 
enormous  sums.  Of  course,  the  money  had  been  mostly 
expended  on  permanent  improvements,  and  could  not  be 
repaid  on  demand.  The  borrowers  never  expected  to  pay 
when  the  notes  came  due,  the  usual  custom  being  to  renew 
over  and  over  again. 

When,  therefore,  on  the  20th  of  July,  1818,  the  parent 
board  demanded  the  collection  of  the  balances  from  the 
Cincinnati  banks  at  the  rate  of  20  per  cent,  every  month,1 
the  inhabitants  of  Ohio  were  extremely  indignant,  and  com- 
plained of  the  action  as  being  diabolically  oppressive.  The 
orders  of  July  were  aggravated  by  the  prohibition  of  the 
receipt  of  the  branch  notes  of  other  offices.  The  Cincinnati 
banks  could  not  pay,2  and,  so  far  from  discharging  their 
indebtedness,  owed  more  in  October  than  they  had  owed  in 
July.3  Nevertheless  they  had  striven  to  reduce  their  debt, 
and  as  a  consequence  had  inflicted  great  distress  upon  their 
debtors,  who  were  absolutely  unable  to  pay,  having  neither 
specie  nor  bank  notes  with  which  to  pay.  The  Cincinnati 
banks  protested,  therefore,  against  the  acts  of  the  Bank  of 
the  United  States  as  a  "  grievance  unprecedented."  *  The 
bank,  however,  could  not  and  would  not  yield,  and,  instead 
of  offering  more  favorable  terms,  prohibited  the  receipt 
of  the  notes  of  these  banks.5  This  act  precipitated  a 

1 F.,  Vol.  Ill,  p.  326,  par.  8. 

2  Cincinnati  committee  to  Bank  of  United  States,  Aug.  20,  1818.—  P.,  Vol.  IV, 
pp.  859,  860. 

3  The  sum  was  $721,006.12.— Jones  to  Crawford,  ibid.,  p.  859.    See  also  NILES,  Vol. 
XV,  p.  59. 

*  Protest  of  the  Cincinnati  banks,  F.,  Vol.  IV,  p.  860. 
5  Resolution  of  Oct.  16, 1818,  ibid.,  pp.  861,  862. 


ATTEMPT  TO  SAVE  THE  BANK  UNDER  JONES  63 

disaster,  the  three  Cincinnati  banks  stopping  payments  in 
November.1 

To  detail  the  events  in  regard  to  the  other  western  states 
would  be  merely  to  repeat,  without  essential  variations,  the 
story  of  the  Ohio  banks.  The  Bank  of  the  United  States 
pressed  for  the  payment  of  its  dues.  The  local  banks  could 
not  collect  their  own  debts,  and  consequently  could  not  pay. 
They  suspended,  and  ruin  fell  upon  thousands.  In  Kentucky 
the  Bank  of  the  State  ceased  specie  payments  November  20. 2 
By  January,  1819,  the  remainder  of  the  Kentucky  banks 
had  suspended,  and  their  notes  were  at  a  discount  of  from 
20  to  30  per  cent.3  Most  of  the  banks  of  western  Pennsyl- 
vania had  ceased  payment  by  December,  18 18.*  Since  the 
initiatory  impulse  came  from  the  Bank  of  the  United  States, 
everyone  held  that  institution  responsible. 

In  the  South  there  were  difficulties  of  like  nature.  In 
South  Carolina  there  was  constantly  a  balance  of  from  $500,- 
000  to  $800,000  due  by  the  state  banks  to  the  Bank  of  the 
United  States.5  The  bank  called  upon  the  banks  of  Charles- 
ton to  pay  $130,535.50,  whereupon  there  was  intense  excite- 
ment, and  the  exasperated  local  banks  threatened  to  get  a 
state  law  passed  hostile  to  the  Bank  of  the  United  States, 
and  also  to  suspend  specie  payments.  They  complained  that 
the  "  monster "  was  iniquitously  draining  the  South  of  its 
specie.6  The  same  conditions  existed  in  North  Carolina, 
where  the  balances  against  the  State  Bank  were  also  large.7 
As  early  as  March,  1818,  a  hint  was  given  that  payment  of 
balances  would  be  agreeable,  though  no  demand  was  made.8 
The  State  Bank  offered  to  pay  in  notes  of  other  offices  of  the 

1  Ibid.,  p.  864. 

2  Though  compelled  to  partial  resumption  immediately  afterward  and  continu- 
ing until  Jan.  1, 1820.— NILES,  Vol.  XV,  p.  283;  GODQE  (Cobbett's  edition),  p.  90. 

3  NILES,  Vol.  XV,  p.  385.  *  Ibid.,  p.  283. 

'•>  Jones  to  Spencer,  Dec.  23,  1818,  F.,  Vol.  Ill,  p.  323 ;  letter  from  Charleston  to 
Jones,  Dec.  4, 1818,  ibid. 

« Ibid.  i  Jones  to  Crawford,  May  29, 1818,  F.,  Vol.  IV,  pp.  844-7. 

8  Grove  of  branch  bank  to  Polk,  of  State  Bank,  March  14, 1818,  ibid.,  p.  848. 


64  THE  SECOND  BANK  OP  THE  UNITED  STATES 

Bank  of  the  United  States,  in  notes  of  other  banks,  or  in 
drafts  upon  other  banks  in  places  where  the  bank  had  offices,1 
but  the  proposition  was  brusquely  refused,  to  the  extreme 
embarrassment  of  the  State  Bank,  which  repeated  the  angry 
charges  that  the  bank  was  attempting  the  ruin  of  the  people 
by  deliberately  and  wickedly  trying  to  draw  away  the  specie 
of  the  state.2 

Under  these  circumstances  the  hatred  and  enmity  of 
states  and  state  banks  to  the  Bank  of  the  United  States 
mounted  higher  and  higher.  From  the  first  these  had  been 
keen  and  persistent.  Thus  the  earliest  constitution  of  Indi- 
ana, adopted  in  1816,  had  prohibited  the  establishment  of 
the  branch  of  any  bank  chartered  outside  the  state.3  In 
February,  1817,  Maryland  laid  a  tax  of  $15,000  per  annum 
upon  the  office  at  Baltimore;4  in  November  Tennessee  fol- 
lowed this  example  with  a  tax  of  $50,000  upon  any  bank 
settled  in  that  state  under  any  but  a  state  charter,5  and  in 
December  Georgia  imposed  an  annual  "  tax  of  thirty-one  and 
a  fourth  cents  on  every  hundred  dollars  of  bank  stock  oper- 
ated upon  or  employed  within  "  the  state,  a  resolution  of  the 
legislature  in  November,  1818,  declaring  that  this  tax  "  was 
only  intended  to  apply"  to  branches  of  the  Bank  of  the 
United  States.6  When  the  panic  began,  the  indignation  of 
the  people  found  vent  in  further  acts  of  the  same  character. 
The  first  constitution  of  Illinois,  framed  in  August,  1818, 
prohibited  the  existence  of  any  but  state  banks  within  the 
state.7  In  December  North  Carolina  laid  an  annual  tax  of 

1  Polk  to  Grove,  March  11, 1818,  F.,  Vol.  IV,  p.  848. 

2  Grove  to  Polk,  March  14, 1818,  ibid.,  and  March  19,  p.  849. 

3  POORE,  Charters  and  Constitutions,  Vol.  I,  p.  509,  Art.  10. 
*Laws  of  Maryland,  1817,  chap.  156,  p.  174. 

5  Laws  of  Tennessee,  Scott's  edition,  Vol.  II,  pp.  389  ff. ;  Laws  of  1817,  chap. 
132,  sec.  2,  Nov.  22, 1817. 

6  For  statute  see  LAMAE,  Laws  of  Georgia  (1810-19),  pp.  889-91;  for  resolution, 
ibid.,  p.  1206. 

7  POOEE,  Vol.  I,  447,  Art.  8,  sec.  21. 


ATTEMPT  TO  SAVE  THE  BANK  UNDER  JONES  65 

$5,000  upon  the  branch  at  Fayetteville ; 1  in  January,  1819, 
Kentucky  imposed  the  largest  tax  of  all,  compelling  each  of 
the  branches  to  pay  $60,000  yearly,2  and  the  next  month 
Ohio  rivaled  Kentucky  by  enacting  that  the  tax  in  that 
state  should  be  $50,000  upon  each  branch.3  Even  in  Penn- 
sylvania, the  supposed  stronghold  of  the  bank,  the  legisla- 
ture warmly  discussed  the  policy  of  a  tax,4  and  in  1819 
petitioned  Congress  to  take  steps  to  amend  the  constitution 
so  as  to  confine  national  banks  to  the  District  of  Columbia.6 
The  subject  was  also  debated  in  the  legislatures  of  Virginia 6 
and  South  Carolina,7  and  DeWitt  Clinton,  of  New  York, 
urged  action  upon  the  legislature  of  that  state.8  It  was  only 
the  decisions  of  the  Supreme  Court  in  the  cases  of  McCul- 
loch  vs.  Maryland  and  Osborn  vs.  the  Bank  of  the  United 
States  which  saved  the  bank.  Had  it  lost  either  of  these 
cases,  there  can  be  no  doubt  that  it  would  soon  have  been 
taxed  out  of  existence  in  all  of  the  southern  and  western 
states. 

More  immediately  disastrous  were  the  losses  suffered  in 
1817-18.  These  were  so  enormous  that  the  bank  was  crip- 
pled in  its  dealings  for  six  or  seven  years.  In  1822  its  sus- 
pended debt  was  in  excess  of  $10,000,000,  that  amount  of  its 
capital  being  tied  up  in  unavailable  assets,  while  the  actual 
loss  was  calculated  in  October  of  that  year  as  $3,743,899. 9 

1  NiLES,Vol.  XV,  p.  367. 

2  SLAUGHTER,  Acts  of  Kentucky,  p.  637,  chap.  343,  Jan.  28,  1819. 

3  CHASE,  Statutes  of  Ohio,  Vol.  II,  pp.  1072  ff.,  chap.  459,  Feb.  8, 1819. 
*NILES,  Vol.  XIV,  p.  64. 

5  A.  of  C.,  16th  Cong.,  1st  Sess.,  Vol.  I,  p.  70. 

6  NILES,  Vol.  XIV,  p.  23,  note.  ">  NILES,  Vol.  XV,  pp.  289,  290. 

8  GOUGE  (Cobbett's  edition),  p.  59. 

9  Expected  loss  in  1822 : 

SUSPENDED   DEBT 

Personal  and  other  than  stock  securities $6,401,255.90 

Loans  on  stock  securities 4,017,050.76 

$10,418,306.66 

of  which  it  is  calculated  that  $3,743,899  will  be  a  loss.— Report  of  Committee  of  Stock- 
holders, Oct.  1, 1822,  CHEVES,  p.  4,  and  NILES,  Vol.  XXIII,  p.  88. 


66  THE  SECOND  BANK  OF  THE  UNITED  STATES 

The  profits  of  the  first  two  years  had  been  $1,100,000,  so  that 
in  this  period  the  management  netted  a  loss  of  $2,600,000.  * 
The  principal  loss  was  at  Baltimore,  the  amount  being 
over  $1,600,000.  The  four  western  offices  came  next. 
Cheves  declared  in  1824  that  from  10  to  15  per  cent  of  the 
capital  loaned  there  had  been  lost,2  and  on  the  1st  of 
April,  1819,  the  sum  due  and  unpaid  at  these  offices  was 
$6,351,120.80,  which  was  reduced  by  less  than  $1,000,000 
on  August  30,1822.3  In  the  South  the  offices  most  offending 
after  Baltimore  were  Norfolk  and  Charleston,  but  there  were 
considerable  losses  in  addition  at  Washington  and  Savannah. 
The  final  loss  in  the  South  was  $2,234,138.61,  while  in  the 
West  it  was  only  $552,576.78.*  The  explanation  of  this 
small  loss  in  the  West  is  to  be  found  in  the  appreciation  of 
western  real  estate  which  the  bank  had  been  forced  to  accept 

i  For  the  profits  see  report  of  stockholders,  Nov.  5, 1819,  NILES,  Vol.  XVII,  p.  165. 
a  JP.,  Vol.  V,  p.  96. 

3 "On  the  1st  of  April  1819,  the  sum  due  to  the  Bank  in  Ohio  and  Kentucky, 
including  balances  due  by  local  banks,  was  6,351,120  dollars,  80  cents ;  on  the  30th  of 
August  1822,  the  sum  due,  including  also  real  estate  taken  in  payment,  was  5,389,477 
dollars,  eighteen  cents,  being  a  reduction  of  961,653  dollars  sixty-two  cents."— 
—CHEVES,  p.  27,  and  NILES,  Vol.  XXIII,  p.  94. 

*  Sums  lost  to  Aug.  30, 1822 : 

Philadelphia $  177,057.02 

Portsmouth 3,708.33 

Boston 2,807.48 

Hartford 6,299.02 

New  York 29,939.79 

Baltimore 1,696,643.09 

Washington 70,794.85 

Richmond 38,057.20 

Norfolk    -       -       -  191,082.66 

Fayetteville 21,481.88 

Charleston 100,428.13 

Savannah 78,041.29 

New  Orleans  -       -  37,609.51 

Louisville 205,446.83 

Lexington 165,846.64 

Cincinnati 94,156.17 

Chillicothe 28,579.45 

Pittsburg 58,547.69 

Total $3,005,527.03 

— H.  K.,  460,  22d  Cong.,  1st  Sess.,  p.  244. 


ATTEMPT  TO  SAVE  THE  BANK  UNDER  JONES  67 

in  liquidation  of  its  debts  in  1818-19.  This  property  had 
been  taken  at  a  low  figure,  but  its  value  increased  with  sur- 
prising rapidity,  largely  owing  to  the  phenomenal  growth  of 
Cincinnati.  Had  it  not  been  for  this  enormous  and  unex- 
pected increase  in  values,  the  bank's  total  losses  in  the 
West  would  hardly  have  been  less  than  $2,000,000.  As  a 
consequence  of  the  transfer  of  real  estate  the  bank  owned  a 
large  part  of  Cincinnati:  hotels,  coffee-houses,  warehouses, 
stores,  stables,  iron  foundries,  residences,  vacant  lots; 
besides  over  50,000  acres  of  good  farm  land  in  Ohio  and 
Kentucky.1  Its  possession  of  this  vast  property  maddened 
the  former  owners,  now  impoverished  by  a  recklessness 
which  they  would  not  acknowledge,  believing  instead  that 
the  bank  was  responsible,  as  if  it  had  taken  possession 
by  violence.  Moreover,  the  situation  gave  to  the  politicians 
an  opportunity  too  tempting  to  be  neglected,  and  by  a 
slight  effort  of  the  imagination  one  can  almost  hear  the 
reverberations  of  "Old  Bullion"  Benton's  voice  startling  the 
drowsy  Senate  as  he  thunders:  "  I  know  towns,  yea,  cities, 
....  where  this  bank  already  appears  as  an  engrossing  pro- 
prietor." 2  "  All  the  flourishing  cities  of  the  West  are  mort- 
gaged to  this  money  power.  They  may  be  devoured  by  it 
at  any  moment.  They  are  in  the  jaws  of  the  monster!  A 
lump  of  butter  in  the  mouth  of  a  dog !  one  gulp,  one  swallow, 
and  all  is  gone!"3 

1  S.  D.,  98,  22d  Cong.,  1st  Sess.,  pp.  22-36. 

2  Thirty  Years,  Vol.  I.  p.  198.  3  C.  Z>.,  Vol.  VIII,  Part  I,  p.  1003. 


CHAPTER  IV 

THE  ADMINISTRATION  OF  LANGDON  CHEVES 

"  A  SHIP  without  a  rudder  or  sails  or  masts,  on  short 
allowance  of  provisions  and  water,  on  a  stormy  sea  and  far 
from  land,  will  afford  a  figure  by  no  means  too  strong  to 
express  the  hapless  condition  of  the  Bank  of  the  United 
States,  when  I  undertook  the  government  of  it."  So  asserted 
Cheves  many  years  later,1  and  with  truth,  for  when  he  came 
into  office  he  found  an  appalling  state  of  affairs.  There  was 
a  general  expectation  that  the  bank  was  about  to  suspend 
specie  payment,  and  that  the  nation  would  once  more  be 
plunged  into  all  the  difficulties  of  the  period  just  before 
its  establishment.2  As  already  seen,  the  situation  of  the 
eastern  offices  was  particularly  serious.  Elsewhere  the 
attempt  to  curtail  had  frequently  ended  merely  in  changing 
the  form  of  the  debt,  while  the  notes  of  the  southern  and 
western  branches  were  still  pouring  into  the  northern  offices 
in  an  overwhelming  flood.3  The  spirit  of  the  offices  is 
evidenced  by  the  act  of  the  Baltimore  directory,  which 
would  not  attempt  to  make  a  new  curtailment  required  in 

1  Cheves  in  answer  to  President  Thomas  Cooper,  of  South  Carolina,  Aug.  18, 
1837,  NILES,  Vol.  LIII,  p.  8,  quoting  the  Charleston  Mercury. 

2  "  My  memory  deceives  me  much  if  I  found  any  one  in  or  out  of  the  Bank,  who 
entertained  a  sanguine  belief  of  its  being  able  to  sustain  its  payments  much  longer. 
On  the  contrary  there  was  ....  a  public  and  general  expectation  that  the  nation 
was  about  to  suffer  the  calamity  of  a  currency  composed  entirely  of  irredeemable 
paper."— CHEVES.  p.  19,  and  MILES,  Vol.  XXIII,  p.  91. 

"  The  chief  difficulty,  probably,  now  will  be  if  the  Bank  cannot  continue  to  pay 
specie,  and  consequently  incur  a  liability  to  be  called  upon  by  its  creditors  for  twelve 

per  cent,  per  annum  interest We  fear  there  is  too  much  cause  to  calculate  upon 

the  Bank  being  placed  in  this  unhappy  situation  before  many  months.'1''—  Bank  direc- 
tors to  Cheves,  Feb.  1, 1819,  Exposition,  p.  39 ;  also  Smith  to  Crawford,  Feb.  2, 1819, 
F.,  Vol.  IV,  p.  869. 

*  "  And  when  in  this  wretched  state,  the  southern  and  western  circulation  was 
pouring  in  upon  these  weak  points."— CHEVES,  p.  15,  and  NILES,  Vol.  XXIII,  p.  90. 

68 


ADMINISTRATION  OF  LANGDON  CHEVES          69 

February,  though,  in  order  to  keep  the  strict  letter  of 
instructions  from  Philadelphia,  the  notes  of  debtors  were 
renewed  "without  the  formality  of  discount."1  An  insig- 
nificant attempt  to  reduce  the  excessive  loans  on  stock  at 
Philadelphia  was  being  met  with  violent  and  sometimes 
successful  opposition  by  the  stockholders.2  The  government 
stock  held  by  the  bank  had  been  sold  and  the  proceeds 
exhausted  without  bringing  any  relief.3  The  bank  was 
almost  without  specie,  and  actually  without  sufficient  in  its 
vaults  to  meet  the  possible  demands  of  the  Philadelphia 
banks,  while  a  still  greater  sum  was  owing  and  immediately 
due  for  money  borrowed  at  home  and  abroad.4  Meanwhile 
the  receipt  of  government  dues  embarrassed  the  bank  to  an 
almost  ruinous  extent,  the  duties  being  paid  by  the  mer- 
chants in  branch  paper,  and  the  debentures  for  these  same 
duties  being  demanded  by  the  government  and  paid  by  the 
bank  in  specie — or  paper  immediately  redeemable  in  specie.5 
There  was  no  specie  to  be  procured  at  home,  and  the 

i "  That,  after  protesting,  by  letter,  without  success,  against  the  curtailing 
order  of  the  Parent  Board,  bearing  date  the  19th  February,  1819,  it  was  agreed  to 
renew  the  notes  without  the  formality  of  discount,  in  order  not  to  violate  the  instruc- 
tions of  curtailment." — Conspiracy  Coses,  p.  114. 

2  "  At  the  close  of  this  period  [of  curtailment]  the  discounts  on  personal  security 
at  Philadelphia,  had  been  so  long  the  subject  of  curtailment,  that  but  a  small  por- 
tion of  them  admitted  of  further  reduction,  and,  after  great  efforts,  a  rule  had  been 
established  to  reduce  the  discounts  which  had  been  granted  on  the  stock  of  the 

Bank,  at  the  rate  of  5  per  cent,  every  60  days Even  this  small  reduction  was 

the  subject  of  loud,  angry,  and  constant  remonstrances  among  the  borrowers,  who 
claimed  the  privileges  and  the  favour  which  they  contended  were  due  to  stockhold- 
ers, and  sometimes  succeeded  in  communicating  their  sympathies  to  the  Board." — 
CHEVES,  p.  16;  NILES,  Vol.  XXIII,  p.  90. 

3  "All  the  funded  debt  which  was  saleable,  had  been  disposed  of,  and  the  proceeds 
exhausted." — CHEVES,  p.  16;  NILES,  ibid. 

<  CHEVES,  p.  17,  and  NILES,  ibid. 

5  "The  sums  which  were  collected  daily  on  account  of  the  revenue,  in  branch 
paper,  were  demandable  the  next  day  in  Philadelphia,  and,  at  the  same  time,  at 
every  office  of  the  establishment,  at  the  discretion  of  the  officers  of  the  Government. 
The  revenue  was  principally  paid  in  Branch  paper ;  .  .  .  .  and  while  the  duties  were 

thus  paid  at  one  comptor  in  Branch  paper,  the  debentures were  demanded 

and  paid  at  the  other  in  specie,  or  its  equivalent, —  money  of  the  place." — CHEVES, 
ibid.,  and  NILES,  ibid.,  p.  91.  See  also  Cheves's  letters  to  Crawford  April  6  and  13, 
1819,  F.,  Vol.  IV,  pp.  873,  874. 


70  THE  SECOND  BANK  OP  THE  UNITED  STATES 

attempt  to  procure  it  abroad  had  broken  down  early  in 
February ;  *  the  bank  was  receiving  little  aid  from  the  South, 
and  none  from  the  West,2  while  its  own  slender  stock  of  the 
precious  metals  was  still  being  drawn  into  these  parts  of 
the  Union.3  "All  the  resources  of  the  Bank,"  declared 
Cheves,  "would  not  have  sustained  it  in  this  course  and 
mode  of  business  another  month !  ! "  *  Nothing  but  disaster 
and  wreck  could  be  expected.  Even  Secretary  Crawford 
abandoned  hope.  "  The  stoppage  of  specie  payments  by  the 
bank  and  by  the  State  institutions  is  inevitable, "  he  wrote  to 
Cheves.5 

The  new  president,  however,  was  the  man  to  save  the 
wreck,  if  it  could  be  saved ;  for  what  was  required  before  all 
things  was  decision  and  firmness,  and  these  Cheves  pos- 
sessed to  an  extraordinary  degree.  He  clearly  perceived 
that  the  essential  cause  of  the  bank's  embarrassment  lay  in 
the  business  of  the  southern  and  western  offices,  and  these 
"  were  immediately  directed  not  to  issue  their  notes,"  while 
the  bank  itself  "  ceased  to  purchase  and  collect  exchange 
on  the  south  and  west."  This  measure  was  the  vital  one 
in  rescuing  the  bank  from  its  immediate  difficulties.7  Alone, 
however,  it  would  have  been  effective  only  after  a  lapse  of 

i  Smith  to  Crawford,  Feb.  2, 1819,  F.,  Vol.  IV,  p.  869. 

2 "The  Southern  Offices  were  remitting  tardily,  and  the  Western  not  at  all."— 
CHEVES,  p.  17,  and  NILES,  Vol.  XXIII,  p.  91.  See  also  letters  of  March  20  and 
April  2, 1819,  from  Cheves  to  Crawford,  Exposition,  pp.  42,  51. 

3  "  The  Bank  itself  continued  ....  to  purchase  and  collect  drafts  on  the  south- 
ern and  even  western  Offices,  though  almost  the  whole  active  capital  already  lay 
in  these  quarters  of  the  Union,  and  though  the  great  object  of  the  curtailments  was 
to  draw  funds  from  these  points." — CHEVES,  p.  15;  NILES,  ibid.,  p.  90. 

*  Exposition,  p.  17;  NILES,  ibid.,  p.  91. 

5"Langdon  Cheves  and  the  United  States  Bank,"  by  Miss  LOUISA  P.  HAS- 
KELL,  Report  American  Historical  Association,  1896,  Vol.  I,  p.  366.  See  also  Craw- 
ford to  Cheves,  April  6, 1819,  CHEVES,  p.  59. 

«  CHEVES,  p.  20;  NILES,  Vol.  XXIII,  p.  92. 

?  "  The  great  cause  which  has  given  security  to  the  bank,  and  without  which  it 
certainly  could  not  have  sustained  itself,  has  been  the  restraint  put  upon  the  offices, 
with  which  the  exchanges  were  adverse,  in  the  issue  of  their  notes." — Cheves  to 
Crawford,  Sept.  15, 1819,  F.,  Vol.  IV,  p.  903. 


ADMINISTRATION  OP  LANGDON  CHEVES          71 

more  time  than  the  bank  had  at  its  disposal.  Hence  it  was 
necessary  to  seek  immediate  relief  in  other  directions. 
Cheves  consequently  brought  forward  a  number  of  addi- 
tional measures  having  this  end  in  view.  The  curtailments 
already  ordered  were  to  be  continued,  though  not  increased ; 
the  balances  due  from  the  state  banks  were  to  be  collected; 
the  government  was  to  be  requested  to  give  the  bank  time 
to  make  transfers  of  public  funds  from  the  places  where 
they  were  collected  to  the  places  where  they  were  to  be 
disbursed;1  to  allow  debentures  to  be  paid  in  the  same  cur- 
rency in  which  duties  were  paid;  finally,  as  a  temporary 
relief  of  absolute  necessity,  the  bank  borrowed  $2,000,000 
in  Europe,  payable  in  three  years.2  "These  measures," 
said  Cheves,  "lifted  the  Bank  in  the  short  space  of  seventy 
days,  ....  to  a  state  of  safety  and  even  some  degree  of 
power."  In  fact,  the  storm  was  not  only  weathered,  but 
the  curtailments  were  in  part  abandoned,  the  state  banks 
assisted,  suspension  averted,  the  currency  improved,  and 
the  capital  of  the  bank  to  some  extent  localized.3 

1  Hitherto  the  government  had  been  allowed  to  call  for  its  deposits  at  any 
office,  no  matter  where  the  funds  might  be.   This  arrangement  was  no  longer  possible, 
as  it  led  to  infinite  embarrassments  and  might  prostrate  the  bank  in  a  single  day. 
See  resolution  of  board  of  April  12,  1819,  ibid.,  p.  874 ;  Cheves  to  Crawford,  May  3, 
1819,  ibid.,  p.  876.    Confined  to  the  offices  at  Philadelphia,  Boston,  New  York,  and  Bal- 
timore. 

2  "(1)  To  continue  the  curtailments  previously  ordered.    (2)  To  forbid  the  Offices 
to  the  south  and  west  to  issue  their  notes  when  the  exchanges  were  against  them. 
(3)  To  collect  the  balances  due  by  local  Banks  to  the  Offices.    (4)  To  claim  of  the 
Government  the  time  necessary  to  transfer  funds  from  the  Offices  where  money  was 
collected  to  those  where  it  was  to  be  disbursed,  as  well  as  like  time  (until  the  difficul- 
ties of  the  Bank  were  removed)  to  transfer  funds  to  meet  the  notes  of  Offices  paid 
in  the  Bank  or  other  Offices  than  those  where  they  were  payable  according  to  their 
tenor.    (5)  To  pay  debentures  in  the  same  money  in  which  the  duties,  on  which  the 
debentures  were  secured,  had  been  paid.    (6)  To  obtain  a  loan  in  Europe  for  a  sum 
not  exceeding  2,500,000  dollars,  for  a  period  not  exceeding  three  years." — CHEVES, 
pp.  20,  21 ;  also  NILES,  Vol.  XXIII,  p.  92.    For  the  exact  sum  borrowed  see  CHEVES, 
p.  25,  and  NILES,  ibid.,  p.  95. 

3 "These  measures  ....  lifted  the  Bank  in  the  short  space  of  seventy  days 
(from  6  March  to  17  May)  from  the  extreme  prostration  which  has  been  described, 
to  a  state  of  safety  and  even  in  some  degree  of  power,  enabled  it  to  cease  its  curtail- 
ments, except  at  points  where  it  had  an  excess  of  capital,  to  defy  all  attacks  upon 
it,  and  to  sustain  other  institutions  which  wanted  aid  and  were  ascertained  to  be 


72  THE  SECOND  BANK  OP  THE  UNITED  STATES 

Having  rescued  the  institution  from  immediate  peril,  it 
became  necessary  to  attempt  a  complete  reform  of  its  busi- 
ness methods  and  the  correction  of  all  abuses,  with  the  pur- 
pose of  restoring  and  afterward  retaining  its  capital.  Cheves's 
management  of  the  institution  was  dominated  by  these  con- 
siderations alone.  He  seemed  to  care  little  about  doing  any 
considerable  business  so  long  as  he  was  perfectly  safe,  and 
his  career  is,  therefore,  to  be  judged,  not  by  his  ability  as  a 
banker  in  ordinary  circumstances,  but  as  an  inventor  of  expe- 
dients to  restore  the  bank  to  the  position  which  it  first  held. 
In  this  he  was  completely  successful ;  as  a  banker,  one  may 
reasonably  doubt  his  title  to  any  pre-eminence. 

Resolved  to  restore  the  capital  of  the  institution,  Cheves 
determined  that  no  dividends  should  be  paid  until  the 
original  capital  was  once  more  intact.1  In  order  to  make 
the  funds  perfectly  safe,  he  strove  for  three  principal  ends: 
the  reduction  of  the  active  funds,  a  proper  distribution  of 
capital  to  the  branches,  and  the  retention  of  these  capitals 
by  the  branches  when  once  they  had  been  assigned. 

To  reduce  the  active  funds,  he  insisted  on  the  retention 
of  the  capital  stock  which  had  been  surrendered  as  a  result 
of  the  insolvency  of  the  debtors  at  Baltimore  and  other 
places  to  the  number  of  37,954  shares,2  thus  virtually  dimin- 
ishing the  bank's  capital  by  $3,795,400.  In  addition  to  this, 
Cheves  secured  a  further  reduction  of  active  means  by  invest- 
ing as  far  as  practicable  in  the  funded  debt  of  the  United 
States.3  As  the  former  management  had  sold  all  the  gov- 
ernment stock  that  was  saleable,4  there  remained  only  the 

solvent;  above  all,  to  establish  the  soundness  of  the  currency  which  had  just  before 
been  deemed  hopeless;  and  in  a  single  season  of  business  (the  first)  to  giro  to  every 
Office  as  much  capital  as  it  could  advantageously  employ." — Exposition,  p.  21,  and 
NILES,  ibid.,  p.  92. 

1  Report  of  Committee  of  Stockholders,  Nov.  5, 1819,  NILES,  Vol.  XVII,  p.  165. 

2  CHEVES,  p.  29,  and  NILES,  Vol.  XXIII,  p.  95. 

3  CHEVES,  p.  30,  and  NILES,  ibid, 

*  There  was  an  excess  of  $322,823  in  March,  1819,  which  was  reduced  to  $160,210  in 
April. —  Reports  of  the  state  of  the  bank  for  1819. 


ADMINISTRATION  OP  LANGDON  CHEVES          73 

government's  subscription  to  the  bank's  capital,  $7,000,000, 
at  5  per  cent.  To  increase  this  the  bank  took  a  government 
loan  in  1820  of  $2,000,000  at  6  per  cent.,  and  another  in  1821 
of  $4,000,000  at  5  per  cent.1  The  capital  was  thus  reduced 
by  $16,955,610.  It  was  further  diminished  by  the  amount 
of  the  suspended  debt,  which  was  in  excess  of  $10,000,000. 
After  all  these  deductions  were  made,  the  amount  left  as 
active  capital  was  about  $8,000,000.  Cheves  thought  this 
almost  sufficient,  calculating,  in  October,  1822,  that  in  any 
case  only  $1,500,000  additional  was  needed.2 

More  important  to  safe  and  proper  management  was  the 
assignment  of  the  capital-  to  the  branches.  The  first  step  was 
to  transfer  the  funds  of  the  bank  from  the  western  and 
southern  offices,  where  it  was  held,  to  the  northern  offices, 
where  it  was  needed.  By  putting  an  end  to  most  of  the 
business  of  the  southern  and  western  offices,  and  by  compel- 
ling them  to  remit  in  specie  or  bills  of  exchange  on  Europe 
or  the  North,  the  bank  by  October,  1819,  corrected  to  a  con- 
siderable extent  the  injurious  distribution  of  the  capital 
occasioned  by  former  mismanagement.  There  were,  how- 
ever, vast  sums  still  locked  up  at  Baltimore  and  the  western 
offices,  and  at  all  the  southern  offices  the  funds  held  were 
excessive.3  Nevertheless,  correct  banking  principles  de- 
manded that  definite  capitals  should  be  assigned  to  the  bank 
and  its  offices,  since  otherwise  it  would  be  impossible  to  "do 
business  with  judgment  or  success." 4  The  1st  of  November, 
1819,  was  therefore  selected  as  the  date  upon  which  the 
capital  should  be  considered  fixed,5  though  the  sums  assigned 
were  in  most  cases  provisional,  and  nothing  whatever  was 
allotted  to  Baltimore  or  to  the  western  offices.6  Meanwhile 
the  southern  offices  were  ordered  to  continue  to  remit  in  bills 

i  CHEVES,  p.  22,  and  NIIES,  ibid.,  p,  91.       2  CHEVES,  p.  30,  and  NILES,  ibid.,  p.  95. 
3  Report  of  Committee  of  Bank,  Sept.  25, 1819,  F.,  Vol.  IV,  p.  907,  sees.  3,  4. 
*Ibid.,  p.  906,  sec.  1.  5  ibid.,  p.  909,  sec.  17.  « Ibid.,  p.  907,  sec.  5. 


74  THE  SECOND  BANK  OP  THE  UNITED  STATES 

of  foreign  or  domestic  exchange  all  excess  of  capital  and  all 
revenue  received  on  account  of  the  government.1 

The  most  difficult  and  the  essential  task  still  remained,  for 
the  mechanism  of  the  system  had  to  be  arranged  so  as  to 
keep  the  capital  stationary,  and  thus  avoid  a  repetition  of 
the  disasters  of  the  previous  years.  In  analyzing  the  causes 
of  the  transfer  of  the  funds  to  the  South  and  West,  the 
directors  pointed  out  those  which  needed  correction  before 
any  permanent  reform  could  be  obtained  or  the  bank's  safety 
assured.  These  were:  the  payment  of  government  revenues 
at  the  eastern  offices  in  notes  of  the  distant  branches,  which 
made  necessary  the  keeping  of  large  supplies  of  specie  at  all 
the  offices  to  redeem  them ;  the  collections  and  drafts  of  the 
bank  and  its  offices  on  each  other;  and  the  payments  on 
account  of  the  government,2  which  had  to  be  made  wherever 
ordered  if  the  bank  held  sufficient  funds  belonging  to  the 
government,  even  if  it  did  not  have  them  at  the  particular 
office  where  payment  was  demanded. 

The  first  of  these  causes  Cheves  always  considered  as  the 
most  serious  after  the  western  note  issues,  because  the 
exchanges  were  invariably  against  the  West,  and  for  half  the 
year  against  the  South ;  and  hence  the  notes  of  these  offices 
would  run  constantly  to  the  East  and  North  in  payment  of 
government  dues,  and  thus  tend  to  shift  the  capital  to  the 
West  and  South.3  As  the  course  of  exchange  could  not  be 
controlled,  one  of  two  things  was,  in  his  opinion,  necessary: 
either  the  government  must  decline  to  receive  the  branch 
notes  in  payment  of  government  dues,  except  where  the 
notes  were  by  their  tenor  made  receivable ;  or  the  bank  must 
put  an  end  to  the  issue  of  western  notes  and  greatly  diminish 
the  issue  of  southern  notes.  At  the  very  beginning  of  his 

1  Eeport  of  Committee  of  Bank,  Sept.  25, 1819,  F.,  Vol.  IV,  p.  908,  sec.  10. 

2  Ibid.,  p.  908,  sec.  12. 

3  Cheves  to  Crawford,  April  6,  1819,  ibid.,  p.  873;  and  Memorial,  Bank  of  the 
United  States,  Dec.  7, 1820,  ibid.,  Vol.  Ill,  p.  589. 


ADMINISTRATION  or  LANGDON  CHEVES          75 

presidency,  therefore,  Cheves  earnestly  appealed  to  Secre- 
tary Crawford  to  cease  the  receipt  of  branch  paper  in  the 
eastern  cities  in  payment  of  government  dues.1  Crawford 
declined  to  accede  to  the  proposition,  as  he  considered  it  ille- 
gal, and  was  certain  that  it  would  be  inexpedient,  injurious 
to  the  treasury,  and  destructive  to  the  bank,  while  it  would 
transform  the  branch  issues  into  local  currencies,  circulating 
at  par  only  within  the  immediate  neighborhood  of  the  issuing 
offices.2  Cheves  submitted,  but  the  belief  that  the  govern- 
ment's receipt  of  such  notes  everywhere  was  dangerous  re- 
mained with  him  to  the  last.  In  December,  1820,  the  bank 
appealed  to  Congress  to  make  modifications  in  the  charter, 
and  especially  urged  a  change  in  this  respect.3  Since  neither 
the  treasury  nor  Congress  would  furnish  the  relief  asked, 
the  same  end  was  reached  by  the  alternative  method,  namely, 
by  prohibiting  the  issues  of  the  offices  against  which  the 
exchanges  ran.  The  western  offices  were  instructed  to  issue 
nothing  larger  than  five-dollar  notes.  The  notes  of  another 
office  were  not  to  be  paid  out  except  by  an  office  having  a 
credit  with  the  office  originally  issuing  them.4 

The  third  difficulty,  that  of  having  to  pay  government 
funds  wherever  they  were  called  for  without  having  time  to 

1  Cheves  to  Crawford,  April  2, 1819,  Exposition,  pp.  49-52.    Same  to  same,  April  6, 
1819,  ibid.,  pp.  53-7;  also  F.,  Vol.  IV,  pp.  873,  874. 

2  Crawford  to  Cheves,  April  6, 1819,  Exposition,  pp.  59-63.    Same  to  same,  April  9, 
pp.  64-9.    It  would  seem,  however,  that  for  a  brief  period  the  bank  refused  to  pay 
such  notes  deposited  by  the  treasury  except  at  the  places  where  payable  by  the  tenor 
of   the  note. — Extract  from  minutes,  F.,  Vol.  IV,  p.  874;  Memorial,  Bank  of  the 
United  States,  Dec.  7, 1820,  ibid.,  Vol.  Ill,  p.  589;  NILES,  Vol.  XVI,  pp.  417, 418;  Craw- 
ford to  Cheves,  April  27, 1819,  F.,  Vol.  IV,  p.  614. 

»  Memorial,  Bank  of  the  United  States,  Dec.  7, 1820,  ibid.,  Vol.  Ill,  pp.  586  ff. 

*  "  When  the  notes  of  an  office  (above  five  dollars)  shall  appear  to  be  drawn  from 
it,  to  be  used  as  a  substitute  for  exchange,  it  shall  immediately  cease  to  issue  them, 
unless  it  be  indispensably  necessary  to  sustain  the  credit  of  the  office  to  do  so.  On 
this  principle  it  will  be  inexpedient,  considering  that  the  exchanges  run  steadily  and 
constantly  against  the  western  country,  that  the  offices  of  Pittsburg,  Cincinnati, 
Chillicothe,  Lexington  and  Louisville  should  issue  their  notes  unless  it  be  indis- 
pensably necessary  to  sustain  their  credit,  until  the  further  order  of  the  Board." — 
Report  of  the  Committee  of  the  Bank  of  the  United  States,  Sept.  25, 1819,  ibid.,  Vol.  IV, 
p.  908,  sec.  14. 


76  THE  SECOND  BANK  OP  THE  UNITED  STATES 

transfer  them,  was  completely  obviated  by  a  new  arrange- 
ment with  the  treasury  by  which  sufficient  time  was  to  be 
given  in  all  cases  for  the  making  of  transfers.1 

These  measures  were  in  themselves  sufficient  to  keep  the 
capital  fixed,  but  Cheves  was  not  a  man  to  take  any  chances, 
and  consequently  further  rules  were  enacted  with  the  same 
object  in  view.  In  addition  to  the  prohibition  upon  the 
issues  of  notes,  each  office  was  to  draw  bills  of  exchange 
upon  other  offices  only  when  it  had  provided  a  fund  upon 
which  to  draw.2  Such  bills  were  to  be  drawn  for  only 
sixty  days  and  payable  at  sight,  thus  avoiding  the  danger 
of  tying  up  capital  in  a  species  of  long  loans;  they  should 
not  be  bought  above  par,  nor  should  checks  be  sold  below 
par.  Each  office  must  make  provision  for  paying  its  notes 
on  presentation,  and  indeed  retain  specie  sufficient  to  meet 
any  unexpected  minor  demand.3  The  offices  should  collect 
debts  due  each  other,  and  furnish  one  another  monthly  lists 
of  notes  of  other  offices  held.  These  notes  were  to  be  sent 
home  as  soon  as  possible,  and  the  funds  to  pay  them  might 
be  secured  by  selling  drafts  on  the  debtor  office ;  conversely, 
collections  might  be  provided  for  by  buying  bills  payable 
at  the  creditor  office.*  Besides  the  monthly  reports,  which 
acted  as  a  check  on  the  impulse  to  draw  on  the  other  offices, 
each  office  was  to  furnish  the  central  board  with  a  weekly 
list  of  the  bills  of  exchange  bought  and  checks  drawn,  giving 
exact  and  minute  information  about  them.5 

1 F.,  Vol.  IV,  p.  909,  sec.  16,  and  Crawford's  answer  to  the  proposals,  Sept.  14, 1819, 
ibid.,  p.  640. 

2 "They  shall  not  draw,  except  on  funds  to  meet  the  payment  of  their  drafts, 
unless  by  an  arrangement  or  understanding  with  each  other.  They  may,  under  such 
arrangements,  establish  mutual  credits  with  each  other  and  with  the  parent  bank, 
of  all  which  arrangements  the  parent  Board  shall  immediately  be  advised." — Ibid., 
p.  908,  sec.  12. 

3 Ibid.,  pp.  908,  909,  sec.  18.  « Ibid.,  p.  908,  sec.  12. 

5  "  The  offices  shall  severally  annex  to  their  weekly  statements  a  list  of  the  bills 
purchased  by  them  in  the  preceding  week,  with  the  names  of  the  drawers,  endorsers, 
and  drawees,  dates,  the  time  to  run,  whether  from  sight  or  date,  and  the  premium  and 


ADMINISTRATION  OF  LANGDON  CHEVES          77 

Such  were  the  measures  for  keeping  the  capital  fixed: 
the  treasury  was  to  draw  for  funds  only  after  giving  time 
for  the  transmission  of  the  funds;  the  offices  were  to  draw 
only  when  they  had  provided  for  the  payment  of  their 
checks  and  bills;  the  notes  of  offices  against  which  the 
course  of  exchange  ran  were  not  to  be  issued.  These  meas- 
ures were  the  essential  ones  in  putting  the  bank  into  a  posi- 
tion where  it  could  safely  continue  its  business,  once  its 
capital  was  withdrawn  from  the  South  and  West  and  prop- 
erly apportioned.  With  their  capitals  assigned,  the  offices 
knew  precisely  how  much  they  had  to  trade  upon,  and  all 
beyond  that  sum  which  came  into  their  hands  had  to  be 
accounted  for  and  returned  at  once  to  the  various  offices  to 
which  it  belonged. 

While  providing  against  dangers  which  threatened  from 
the  bank  management,  Cheves  undertook  to  hold  the  state 
banks  to  a  strict  accountability.  It  was  advisable  for  the 
bank's  profits  that  the  state  banks  should  not  be  suffered  to 
retain  enormous  balances  due  to  the  bank;  it  was  necessary 
to  the  bank's  safety  that  they  should  not  be  permitted  to 
trade  absolutely  without  restriction,  for  if  they  did  so  the 
currency  could  not  be  kept  sound,  and  specie  payments 
could  not  be  continued.  Consequently,  as  a  means  to  the 
securing  of  the  bank's  just  profits,  to  its  safety,  and  to  the 
soundness  of  the  currency,  Cheves  insisted  upon  an  imme- 
diate reduction  of  state-bank  debts,  a  settlement  of  bal- 
ances in  the  future  at  fixed  intervals,  and  the  constant 
presentation  of  their  notes  for  specie.1  At  the  same  time 
vigorous  efforts  were  made  to  recover  the  bank's  funds  in 
Kentucky  and  Ohio.  By  taking  mortgages  and  collateral 

interest  received,  and  also  the  aggregate  amount  of  the  checks  drawn  by  them,  with 
the  average  rate  of  the  premiums  received." — Ibid.,  sec.  13. 

i "  It  is  generally  understood  that  the  U.  S.  office  in  this  city  has  called  on  the 
state  banks  to  pay  up  their  balances,  about  20  per  cent,  a  week,  till  paid;  then 
to  settle  up  weekly,  or  at  some  short  period.  This  is  by  orders  from  head  quarters." 
— NIL.ES,  Vol.  XVI,  p.  261,  quoting  the  Richmond  Enquirer  of  May  28, 1819. 


78  THE  SECOND  BANK  or  THE  UNITED  STATES 

security,  and  by  accepting  real  estate  on  terms  easy  to  the 
debtors,  it  contrived  by  August  30,  1822,  to  secure  $961,- 
653.62  out  of  a  debt  due  at  Cheves's  accession  of  $6,351,- 
120.80.  Cheves  naturally  regarded  this  as  an  unusual 
achievement.1 

Reform  in  the  management  was  energetically  pursued. 
Salaries  were  at  once  reduced,2  current  expenses  cut  to  the 
lowest  possible  figure,3  and  the  London  agency  discontinued, 
in  so  far  as  possible.*  As  a  consequence  the  expenses  were 
lower  than  at  any  other  period  of  the  bank's  history.5 
Changes  of  officials  and  directors  began  even  before  Cheves 
was  placed  at  the  head  of  the  bank.  In  January,  1819, 
fourteen  new  directors  had  been  elected  to  the  parent  board 
out  of  a  total  of  twenty-five,6  and  immediately  afterward 
President  Jones  and  George  Williams  resigned  from  the 
board.7  Cheves  remorselessly  continued  this  necessary  work, 
weeding  out  incompetent  officers  and  striving  to  bring 
criminals  to  punishment.  Less  than  a  year  after  his  enter- 
ing office,  Cashier  Jonathan  Smith  left  the  bank.8  McCul- 
loch  was  forced  out  of  the  Baltimore  branch  in  May,  1819, 
and  Buchanan  at  once  resigned;9  the  directors  of  the  branch 
were  changed;10  a  new  president  was  elected;11  and  suits  were 
instituted  against  Buchanan,  Williams,  and  McCulloch  for 

1  Exposition,  pp.  26,  27,  and  NILES,  Vol.  XXIII,  p.  94. 

2  President's  and  cashier's  salaries  from  $7,000  to  $6,000;  rest  of  the  officers,  20 
per  cent. 

3  "  The  current  expenses  of  the  bank  have  been  essentially  reduced  since  the 
year  1819."—  Report  of  Bank  Committee,  Oct.  1,  1822,  CHEVES,  pp.  11,  86,  87,  and 
NILES,  ibid.,  p.  89. 

*  Report  of  Committee  on  the  State  of  the  Bank,  July  19, 1821,  NILES,  Vol.  XX, 
p.  344. 

6  S.  D.  98,  22d  Cong.,  1st  Sess.,  pp.  44-8. 
6ff.  R.  460,  22d  Cong.,  1st  Sess.,  p.  286. 

7  CHEVES,  p.  39,  and  NILES,  Vol.  XV,  p.  417. 

8  NILES,  Vol.  XVII,  p.  440.    His  place  was  taken  on  Feb.  25,  1820,  by  Thomas 
Wilson.— Cheves  to  Crawford,  March  1, 1820,  F.,  Vol.  IV,  p.  920. 

9  Cheves  to  Crawford,  May  27, 1819,  Exposition,  p.  73,  and  NILES,  Vol.  XVI,  p.  223. 
10  NILES,  ibid.,  p.  321.    The  vacancies  were  five.  » Ibid.,  p.  238. 


ADMINISTRATION  OP  LANGDON  CHEVES          79 

conspiracy  to  defraud  the  bank.  These  came  to  trial  in  the 
courts  of  Maryland  in  1821.  The  lower  court  acquitted  the 
defendants,  and  the  decision  was  then  overruled  by  the  court 
of  appeals;1  but  on  re-trial  in  the  lower  court  in  1823  the 
defendants  were  again  acquitted.2  Suit  was  also  brought 
against  the  cashier  of  the  Middletown  branch  for  defalca- 
tion,3 while  similar  measures  were  taken  at  other  offices.  At 
Louisville,  Ky.,  the  number  of  directors  was  increased  from 
eight  to  thirteen,  only  four  of  the  old  directors  being 
retained,  and  a  new  president  was  appointed.4  Half  the 
directors  at  the  offices,  Niles  calculated,  were  turned  out.5 
In  August,  1819,  the  president  of  the  Richmond  board 
resigned,6  there  being  a  deficit  at  that  branch  of  some 
$60,000;  and  in  September,  1820,  the  cashier  at  Fayette- 
ville,  N.  C.,  resigned  because  of  a  deficiency  in  his  accounts.7 
Meanwhile  the  western  and  southern  offices  were  carefully 
investigated  by  committees  of  the  bank  which  reported  their 
condition  as  well  as  the  amount  of  losses  suffered  during 
the  first  years  of  the  bank.8  Cheves  was  of  the  opinion  that 
there  were  too  many  branches,9  and  it  was  determined  to 
reduce  the  number,  if  possible.10  The  attempt  was  made,  but 
the  Cincinnati  branch  alone  was  withdrawn  in  October, 

1  Conspiracy  Cases,  Appendix,  pp.  81  ff.  *Ibid.,  Appendix,  pp.  1  ff. 

3  Sum  lost,  $66,548.    Cashier  removed  Oct.  27, 1820.— 12  WHEATON,  12, 13. 

*  NILES,  Vol.  XVI,  p.  260.  5  NILES,  Vol.  XVII,  p.  325,  Jan.  15, 1820. 

6  NILES,  Vol.  XVI,  p.  405,  Aug.  14, 1819;  p.  421,  Aug.  21, 1819.  The  fault  was  with 
one  of  the  clerks  of  the  branch.— NILES,  Vol.  XVIII,  p.  32,  March  11, 1820,  quoting 
the  Richmond  Examiner. 

i  NILES,  Vol.  XIX,  p.  26,  Sept.  29, 1820,  quoting  the  Fayetteville  Observer. 
8  CHEVES,  pp.  26,  27,  and  NILES,  Vol.  XXIII,  p.  94. 

9 "We  have  too  many  branches,  ....  I  hope  they  will  be  reduced." — Cheves 
to  Crawford,  May  27, 1819,  Exposition,  p.  73. 

10  "The  committee  strongly  recommend  as  expedient,  that  the  number  of  the 
offices  of  discount  and  deposite  ....  should  be  gradually  diminished,  whenever 
it  shall  be  deemed  beneficial  to  the  institution." — Report  of  Committee  of  Bank 
Stockholders,  Nov.  5, 1819,  NILES,  Vol.  XVII,  p.  166.  The  same  recommendation  was 
made  by  the  committee  of  1822.— CHEVES,  p.  11 ;  NILES,  Vol.  XXIII,  p.  89. 


80  THE  SECOND  BANK  OP  THE  UNITED  STATES 

1820,1  it  being  found  "  inexpedient  to  discontinue  any  other 
office." 2 

Complete  success  crowned  these  various  measures.  On 
the  1st  of  January,  1821,  the  capital  was  once  more  entire,3 
$3,550,000  having  been  appropriated  from  profits  since  1819 
to  a  contingent  fund  to  cover  the  losses  of  the  early  years. 
A  dividend  of  1^  per  cent,  was  then  declared.4  By  January, 
1823,  the  capital  was  fairly  apportioned,  though  not  yet  in 
entire  consonance  with  the  best  interests  of  the  bank.  Per- 
manent capitals  were  fixed  in  the  cases  of  the  southern  and 
northern  offices,  with  the  exception  of  Baltimore.  Here  and 
at  the  western  offices  no  capitals  could  yet  be  assigned.5 

The  effect  of  these  measures  upon  the  volume  of  the 
bank's  business  was  marked.  With  the  effective  funds  of 
$8,000,000,  to  which  Cheves  had  virtually  reduced  the  capital 
of  the  bank,  no  extensive  business  was  done,  and  under  his 
management  little  could  be  done ;  for  his  policy  was  one  of 
continuous  restriction.  Since  the  western  and  southern 
offices  could  rarely  issue  notes,  they  could  not  make  any 
material  discounts,  and  the  measures  thus  adopted  checked 

1  Cheves  to  Crawford,  Oct.  21, 1822,  F.,  Vol.  IV,  p.  944.    Oct.  2  was  the  date  of  with- 
drawal. 

2  CHEVES,  p.  28,  and  NILES,  Vol.  XXIII,  p.  94. 

3  "  Resolved,  That,  in  the  opinion  of  the  board,  the  losses  of  the  bank,  previously 
sustained,  were  repaired,  and  that  the  capital  stock  was  re-established,  and  made 
whole  on  the  first  day  of  January,  1821."— Report  of  Committee  on  the  State  of  the 
Bank,  Jan.  23, 1821,  NILES,  Vol.  XIX,  p.  375. 

*  Eeport  Dividend  Committee  of  Bank,  July  2, 1821,  NILES,  Vol.  XX,  pp.  298- 
300,  and  H.  B.  460,  22d  Cong.,  1st  Sess.,  p.  213. 

5  Distribution  of  capital,  Dec.,  1822 : 

Philadelphia  -       -       -     $24,245,306.24  (presumably  includes  suspended  debt,  etc.). 
Portsmouth        -       -  200,000.00       Fayetteville       ....     $    500,000.00 

Boston      -       -       -  1,500,000.00       Charleston      ....  1,500,000.00 

Providence         -       -  350,000.00       Savannah 1,000,000.00 

Middletown    -       -       -          200,000.00       Lexington      -       -       -       -  

New  York    -       -       -  2,500,000.00       Louisville 

Baltimore        ...        Chillicothe     ....  

Washington        -       -  500,000.00       Cincinnati 

Richmond        -       -       -       1,000,000.00       New  Orleans ....  1,000,000.00 

Norfolk        -       -       -  500,000.00       Pittsburg 

—F.,  Vol.  IV,  p.  477. 


ADMINISTBATION  OP  LANGDON  CHEVES          81 

western  business  almost  entirely.  In  the  light  of  this  fact 
it  was  futile  for  Cheves  to  assert  that  his  management  had 
never  ordered  a  contraction.1  It  never  had,  in  so  many 
words,  but  the  entire  policy  of  that  management  meant  a 
continuous  contraction.  "  Total  investments  "  for  the  whole 
of  Cheves's  administration  were  much  less  than  at  any  other 
period  of  the  bank's  existence,  and  discounts  were  par- 
ticularly restricted,  running  from  about  $25,000,000  to 
$30,000,000  out  of  from  $39,000,000  to  $44,000,000  of 
productive  funds.2 

The  issues  kept  pace  with  the  discounts,  ranging  from 
$3,519,000  in  January,  1820,  to  $6,630,000  in  September  of 
the  same  year.  The  West  and  South  were  almost  completely 
deprived  of  the  bank's  notes,  as  a  consequence  of  the  policy 
of  September,  1819,  which  forbade  their  issue  when  the 
course  of  exchange  was  adverse,3  though  in  October  of  that 
year  the  same  plan  allowed  all  the  offices  to  issue  five-dollar 
notes,  no  matter  what  the  course  of  exchange,  and  provided  for 
their  redemption  at  all  the  offices.4  This  permission,  however, 
was  of  little  value,  since  the  notes  had  to  be  signed  by  the 
president  and  cashier  of  the  parent  board,  and  these  officers 

1  "  I  now  state,  and  defy  contradiction,  and  am  ready  to  prove  that  no  curtail- 
ment has  been  ordered  from  the  time  I  took  my  seat,  until  this  day." — Exposition, 
p.  21,  and  NILES,  Vol.  XXIII,  p.  92. 

2  Out  of  a  total  of  $40,640,000  of  productive  funds  in  April,  1819,  $33,480,000  were  in 
discounts.    In  1820  discounts  at  no  time  exceeded  $29,913,000.    In  1821  discounts  at 
their  maximum  were  $29,346,000  out  of  a  total  of  $40,061,000,  while  in  1822  the  maximum 
was  $28,561,000  out  of  a  total  of  $44,602,000.    In  the  discounts,  too,  would  be  included 
the  suspended  debt  of  $10,000,000. 

3  "  All  notes  issued  south  and  west  of  Washington  have,  in  consequence  of  the 
state  of  exchange  between  these  places  and  the  commercial  cities  to  the  east  of  this 
place,  centered  in  those  cities.    The  Bank  has  consequently  found  itself  constrained 
to  direct  those  branches  to  refuse  to  issue  their  notes,  even  upon  a  deposite  of  specie. 
The  effect  of  these  causes,  combined,  has  been,  the  exclusion  from  circulation,  in  all 
the  states  west  and  south  of  the  seat  of  government,  of  the  notes  of  the  Bank  of  the 
United  States  and  its  offices."— Crawford's  Report,  Dec.  1, 1820,  F.,  Vol.  Ill,  p.  552. 

*  Oct.  16, 1819.  "  Notice  is  hereby  given,  that  the  notes  of  this  bank  and  its  offices, 
of  the  denomination  of  five  dollars,  will  be  received  and  paid  on  demand,  at  the 
bank  and  its  offices  respectively,  without  reference  to  the  place  where  they  may,  by 
their  terms,  be  made  payable. — By  order  of  the  board  of  directors,  Jonathan  Smith, 
cashier."— NILES,  Vol.  XVII,  p.  115,  Oct.  23, 1819 ;  see  F.,  Vol.  IV,  pp.  908,  909,  sec.  15. 


82  THE  SECOND  BANK  or  THE  UNITED  STATES 

being  entirely  too  busy  to  give  adequate  time  to  this  task, 
very  few  five-dollar  notes  were  furnished.1  The  bank,  never- 
theless, was  anxious  to  meet  the  difficulty  by  increasing  its 
issues  of  five-dollar  notes,2  and  the  order  allowing  them  to  be 
taken  at  all  offices  gave  relief  in  the  North.  The  prohibition 
upon  the  offices  against  receiving  any  of  the  notes  had  stood 
for  fourteen  months,  and  had  caused  much  embarrassment 
and  excessive  feeling.3 

Cheves's  management  of  the  bank,  on  the  whole,  was 
excellent.  Nevertheless,  he  failed  to  avoid  all  errors.  He 
could  not  restrict  overdrawing  either  at  the  parent  bank  or 
at  the  branches.*  He  could  not  control  the  branches  to  the 
extent  requisite,  and  found  an  adequate  apology  for  his 
failure  in  the  nature  of  the  branch  directorates  and  their 
officers.  He  recommended  as  remedies  the  withdrawal  of 
offices  where  possible,  and  the  payment  of  good  salaries 
to  the  presidents.5  His  banking  methods,  moreover,  were 
not  altogether  commendable.  He  discounted  notes  at 
long  dates,6  he  made  loans  on  the  security  of  the  bank's 
stock,7  and  he  was  content  to  have  the  bank's  issues  consti- 

1  Memorial,  Bank  of  the  United  States,  Dec.  7, 1820,  F.,  Vol.  HI,  p.  589. 

2  "  The  five  dollar  notes  of  the  bank  and  the  offices  shall  be  increased  as  fast  as 
they  can  be  prepared  and  signed." — Report  of  Committee  of  the  Bank,  Sept.  25, 1819, 
F.,  Vol.  IV,  p.  908,  sec.  15." 

3NILE3,  Vol.  XV,  p.  61,  Sept.  19, 1818;  Vol. 'XVI,  p.  290,  June  26, 1819;  Vol.  XVII, 
p.  5,  Sept.  4.  1819. 

*  "  Sometimes  when  checks  are  presented,  the  officer  will  not  think  it  neces- 
sary scrupulously  to  examine  the  accounts  of  the  individuals  drawing,  to  see  with 

how  much  they  are  credited,  but  will  pay  them  at  once Mr.  Cheves  attempted 

to  check  this  practice  as  an  irregularity,  and,  in  consequence,  the  business  of  the 
bank  with  the  brokers  was  diminished,  and  many  complaints  were  made  by  the  mer- 
chants. The  practice  was  soon  resumed,  not,  however,  with  the  assent  of  Mr. 
Cheves."— T.  WILSON,  H.  R.  460,  22d  Cong.,  1st  Sess.,  p.  113;  case  at  Savannah 
branch,  1820-21,  S.  Nicholas  to  Biddle,  Feb.  26, 1821,  B.  P. 

5  Cheves  to  Crawford,  May  27, 1819,  Exposition,  p.  73,  and  Report  of  Committee 
of  Stockholders,  ibid.,  p.  11. 

«  "  The  bank,  to  keep  up  its  business  as  far  as  possible,  discounted  long  paper, 
say  at  four  and  six  months,  and  perhaps  longer." — Cheves  in  answer  to  T.  Cooper, 
Aug.  18, 1837,  NILES,  Vol.  LIII,  p.  8,  quoting  the  Charleston  Mercury. 

^  The  amount  of  loans  on  bank  stock  in  Aug.,  1822,  was  $5,974,725.80.— Biddle  to 
stockholders,  Sept.,  1831,  NILES,  Vol.  XLI,  p.  117. 


ADMINISTRATION  OP  LANGDON  CHEVES          83 

tute  merely  local  currencies,  and  strove  to  make  them  so. 
In  short,  Cheves  was  not  a  banker  either  by  profession  or 
by  inclination.  He  saved  the  bank,  but,  having  done  that, 
he  had  exhausted  his  usefulness  to  the  institution. 

The  difficulties  with  the  states  and  the  state  banks  con- 
tinued all  through  his  administration,  and  were  indeed  much 
more  serious  then  than  either  before  or  after.  The  currencies 
of  the  state  banks  were  in  a  wretched  condition.  In  April, 
1819,  bank  paper  at  New  York  ranged  from  par  for  New 
England  notes  to  75  per  cent,  discount  for  other  notes ;  at 
Baltimore,  in  August,  1819,  New  England  notes  were  depre- 
ciated from  1  to  6  per  cent.,  New  York  notes  from  par  to  8 
per  cent.,  Pennsylvania  notes  from  par  to  60  per  cent.,  west- 
ern notes  from  10  to  60  per  cent. ,  and  southern  notes  from  1 
to  25  per  cent.1  Throughout  the  states  failures  were  con- 
tinuous through  1819-20  ;2  in  the  South  and  West  affairs  were 
even  worse.  All  the  banks  of  North  Carolina  virtually  sus- 
pended specie  payments  May  31,  1819.3  The  banks  of  South 
Carolina  did  not  regularly  pay  specie  until  1823.4  In  July, 
1819,  the  Nashville  Bank  of  Tennessee  suspended  payment.5 
The  Bank  of  Missouri  stopped  in  August,  1821, 6  and  in  that 
month  Cheves  was  unable  to  find  any  bank  in  Tennessee, 
Indiana,  or  Illinois  which  he  considered  perfectly  sound.7 
In  brief,  there  were  very  few  banks  in  the  South  and  West 
during  the  years  1819-22  which  redeemed  their  notes  in 
specie.  In  Tennessee,  Kentucky,  Ohio,  Missouri,  Illinois, 
and  Indiana  affairs  were  even  worse  than  elsewhere,  for  in 
these  states  the  relief  system  was  established,  hindering 
creditors  from  collecting  their  debts,  with  the  effect  of  bring- 
ing disgrace  and  ruin  upon  the  states  themselves.8  The  con- 

i  NILES,  Vol.  XVI,  p.  434.  2  ibid.,  Vols.  XVI  and  XVII,  passim. 

3  F.,  Vol.  IV,  p.  1039.  *  GOUGE  (Cobbett's  edition),  p.  104. 

5  Crawford  to  Cheves,  July  28, 1819,  F.,  Vol.  IV,  p.  629. 

6  Ibid.,  p.  758.    Aug.  24, 1821.  1  Cheves  to  Crawford,  Aug.  7, 1821,  ibid.,  p.  956. 
8  That  is,  a  system  intended  to  give  relief  to  the  debtor  by  throwing  obstacles  in 

the  way  of  the  collection  of  debts  by  the  creditor.    This  was  done  by  enacting 


84  THE  SECOND  BANK  OF  THE  UNITED  STATES 

sequences  were  painful  to  all  parties.  The  bank  would  not 
take  the  notes  of  any  but  specie-paying  banks,  it  did  not 
issue  its  own  notes  in  any  considerable  quantity  in  the 
South  and  West,  and  it  forced  the  specie-paying  state 
banks  to  restrict  their  issues  by  frequent  presentation  of 
their  notes  for  redemption.  As  a  result  the  people  of  these 
sections  could  secure  no  loans,  and  were  left  totally  with- 
out a  sound  currency.  Convinced  that  the  bank  was  to 
blame  for  all  their  woes,  the  entire  population  of  the  South 
and  West  spent  their  nights  and  days  in  reviling  it  as  a 
rapacious,  greedy,  oppressive,  and  destructive  monopoly. 
Cheves  had  no  wish  to  play  the  martyr,  and  consequently 
adopted  as  lenient  a  policy  as  possible;  but  it  was  all  in 
vain,  as  his  experience  proved. 

The  banks  of  Savannah,  namely,  the  Planters'  Bank  and 
the  Bank  of  the  State  of  Georgia,  had  enjoyed  immunity 
from  paying  their  debts  while  Jones  was  president  of  the 
bank.  Under  Cheves  the  case  was  altered.  As  the  bank 
issued  no  notes  in  Georgia,  the  notes  of  the  Georgia  banks 
were  received  in  payment  of  the  government  revenue,  and  the 
Bank  of  the  United  States,  which  took  them,  credited  them 
to  the  treasury  as  specie.  As  a  natural  consequence  it  then 
asked  the  Georgia  banks  to  redeem  them  in  specie,1  and  thus 
forced  the  Georgia  banks  to  reduce  their  business  in  what 
they  considered  an  astounding  degree.2  Moreover,  in  May, 
1820,  the  directors  determined  that  the  balances  against  the 
Georgia  banks  must  be  reduced.  Hitherto  the  Savannah 

replevin  laws,  staying  the  execution  of  judgments  in  favor  of  the  creditor,  or  giving 
the  debtor  the  right  to  recover  at  a  slight  advance  his  property  sold  in  payment  of 
his  debts ;  or  by  laws  forbidding  the  sale  of  real  estate  excepting  at  a  value  appraised 
by  the  neighbors  of  the  debtor ;  or  by  similar  pernicious  legislative  devices. 

1  "  The  heavy  balances  which  had  before  accumulated  were  caused  by  receipts 
on  account  of  the  revenue  and  Government  drafts,  and  have  been  long  since  paid  to 
the  Government  by  this  bank."—  Cheves  to  Crawford,  June  9, 1820,  F ,  Vol.  IV,  p.  927. 

2  "  The  very  diminished  amount  of  their  circulation,  (understood  to  be  two- 
thirds  of  their  paid  capital,  whereas  it  was  once  as  three  to  one)." — Bichardson 
to  Cheves  -July  16, 1820,  ibid.,  p.  937. 


ADMINISTRATION  OP  LANGDON  CHEVES          85 

banks  had  received  the  benefit  of  at  least  $200,000  of  the 
bank's  capital,1  this  being  the  average  amount  of  the  debt 
against  them.  Even  now  the  directors,  dreading  the  possible 
results  of  popular  hostility  in  the  great  state  of  Georgia,  pre- 
pared to  allow  themselves  to  be  robbed  still  further,  though 
to  a  less  extent.  The  Georgia  banks  were  to  be  allowed  a 
permanent  credit  of  $100,000  without  interest,  that  sum  to  be 
held  by  the  branch  in  Savannah  in  their  notes  and  not  pre- 
sented for  payment.  In  other  words,  the  bank  was  willing 
to  devote  $100,000  of  its  capital  to  the  use  and  profit  of  the 
state  banks  of  Georgia.  But  beyond  this  it  would  not  go ; 
it  sternly  demanded  that  all  debts  in  excess  of  the  $100,000 
should  be  duly  paid,  and  instructed  its  offices  not  to  receive 
the  notes  of  the  banks  unless  they  would  pay  the  excess  on 
demand.2  The  Georgia  banks  considered  the  propositions 
monstrous,  refused  to  pay  the  excess,3  and  declined  haughtily 
to  suffer  the  indignity  of  daily  settlements  for  their  notes.* 

1 "  Whereby  the  office  lost  and  these  banks  gained  the  use  of  the  sum  of  $200,000, 
or  thereabouts,  of  the  capital  of  the  branch  for  a  period  of  nearly  three  years." — 
Report  of  Committee  on  the  State  of  the  Offices,  July  11, 1820,  ibid.,  p.  933.  See  exact 
figures,  ibid,  p.  934,  column  4  of  table. 

2"1.  Resolved,  That  the  office  at  Savannah  do,  immediately  on  the  receipt  of  this 
order,  cease  to  receive  in  deposit  or  payment  the  notes  of  such  local  banks  as  shall 
not  punctually  and  bona  fide  redeem  them. 

"  2.  Resolved,  nevertheless,  That  if  the  said  banks,  respectively,  shall  bona  fide  pay 
on  demand  their  proportions  of  the  whole  of  the  local  paper  held  by  the  office, 
over  and  above  their  proportions,  respectively,  of  the  sum  of  $100,000,  which  the  office 
is  permitted  to  keep  on  hand,  then  the  foregoing  resolutions  shall  cease  to  operate  as 
to  such  banks,  respectively. 

"  3.  Resolved,  That  on  failure  of  the  said  banks,  respectively,  to  honor  their  notes 
in  the  manner  stated  in  the  second  resolution,  suits  be  commenced  against  them, 
respectively,  at  the  next  return  of  the  Circuit  Court  of  the  United  States  for  the  Dis- 
trict of  Georgia,  for  the  recovery  of  the  whole  amount  of  their  paper  held  by  the 
office,  with  legal  and  customary  interest  thereon." —  Report  of  Committee  on  the 
State  of  the  Offices,  May  30, 1820,  ibid.,  p.  932. 

3  Planters'  Bank  refused  to  the  amount  of  $10,900;  State  Bank,  $25,600.— Hunter, 
of  Savannah,  to  Cheves,  May  30, 1820,  ibid.,  p.  928.  This  in  excess  of  the  permanent 
deposit.—  Cheves  to  Crawford,  June  9, 1820,  ibid.,  p.  927. 

*  "  The  requisition  by  the  office  of  the  United  States  Bank  for  a  daily  cash  settle- 
ment from  the  local  banks  has  been  resisted,  not  only  as  unnecessary  and  totally 
without  example  in  the  intercourse  of  the  banks  in  this  quarter  of  the  Union,  who 
have  always  acted  towards  each  other  with  unlimited  and  distinguished  confidence, 
but  as  otherwise  objectionable."—  Report  of  Joint  Committee  of  Savannah  Banks 
[Planters'  and  Bank  of  the  State  of  Georgia],  June  21, 1820,  ibid.,  p.  1055. 


86  THE  SECOND  BANK  OP  THE  UNITED  STATES 

Nevertheless,  the  bank  was  still  unwilling  to  grapple  with 
the  state  institutions  and  took  steps  toward  further  conces- 
sions. The  Georgia  banks  now  dictated  their  terms:  daily 
settlements  of  balances  must  be  abandoned ;  the  Bank  of  the 
United  States  must  issue  its  own  notes  and  not  those  of  the 
state  banks ;  and,  finally,  the  Savannah  banks  would  redeem 
the  notes  already  held  and  submit  to  weekly  or  monthly  set- 
tlements in  the  future.1  Willing,  if  possible,  to  evade  the 
conflict,  the  Bank  of  the  United  States  accepted  these  terms,2 
at  the  same  time  indignantly  repudiating  the  insinuation  of 
the  Georgia  banks  that  it  wished  to  draw  specie  from  them.3 
Yet  the  arrangement  was  scarcely  accepted  when  a  letter 
from  the  president  of  the  Savannah  bank  revealed  to  Cheves 
that  the  state  banks  would  hardly  be  willing  to  consent  to 
weekly  settlements.4  To  this  Cheves  replied  that  weekly 
settlements  must  be  adhered  to,  but  conceded  that,  if  the 
Savannah  banks  would  pay  6  per  cent,  interest  on  the  bal- 
ances in  excess  of  $100,000,  they  need  not  discharge  them.5 
The  banks  of  Savannah  at  last  accepted  these  terms  in  Janu- 
ary, 1821,  with  the  addition,  however,  that  checks  on  north- 
ern cities  might  be  given  in  lieu  of  specie. 

But  peace  endured  only  for  the  moment.  No  concessions 
could  satisfy  the  Georgia  banks,  for  they  were  resolved  to  do 

1  Report  of  Joint  Committee  of  Savannah  Banks,  F.,  Vol.  IV,  p.  1056. 

2  "1.  Resolved,  That  the  office  at  Savannah  be  authorized  and  instructed,  so  long 
as  the  balances  of  the  Savannah  banks  shall  be  kept  within  the  rules  heretofore  pre- 
scribed, not  to  require  settlements  of  these  banks  oftener  than  once  in  each  week, 
unless  the  amount  of  the  notes  which  it  may  hold  of  the  said  banks,  respectively, 
shall  exceed  the  sum  of  $50,000,  over  and  above  their  respective  proportions  of  the 
aggregate  of  local  paper  which  the  office  is  allowed  to  hold ;  in  which  case  the  office 
will,  of  course,  demand  as  heretofore  directed. 

"  2.  Resolved,  That  the  office  at  Savannah  be  authorized  to  cease  entirely,  so  long 
as  the  balances  shall  be  kept  within  the  limits  aforesaid,  to  pay  out  the  notes  of  the 
banks  of  Savannah,  if  these  banks  shall  desire  it,  and  that  in  that  case  it  pay  all 
demands  upon  it  in  its  own  notes,  (except  where  it  shall  be  disadvantageous  to  the 
interests  of  the  bank  to  do  so),  or  in  specie." —  Report  of  Committee  on  the  State  of 
the  Bank,  July  11, 1820,  ibid.,  p.  934. 

3  Ibid.  *  Richardson  to  Cheves,  July  16, 1820,  ibid.,  p.  937. 
6  Cheves  to  Richardson,  July  21, 1820,  ibid.,  p.  938. 


ADMINISTRATION  OP  LANGDON  CHEVES          87 

a  business  far  in  excess  of  what  was  commercially  justifiable, 
and  the  agreement  of  January  still  restricted  their  dealings. 
They  complained  that  they  could  do  no  "  new  business ;" 
and  that  they  imported  specie  at  a  loss  to  redeem  balances 
held  by  the  Bank  of  the  United  States.1  After  six  months' 
trial  of  the  new  plan,  they  were  in  a  worse  condition  than 
ever.2  The  Planters'  Bank,  therefore,  annulled  the  agree- 
ment on  June  22,  1821,3  making  the  astounding  request 
that  no  more  of  its  notes  be  received  at  the  branch,  and 
declining  to  redeem  notes  presented  by  the  Bank  of  the 
United  States  henceforth,  unless  relations  were  placed  on  a 
more  "liberal  and  friendly  footing."* 

Cheves  was  righteously  indignant.  He  declared  that 
the  Bank  of  the  United  States  had  "  exhausted  the  cup  of 
concession  "  and  would  go  no  farther,5  and  the  branch  dis- 
tributed circulars  accusing  the  Planters'  Bank  of  having 
suspended  specie  payments.8  Hereupon  the  Planters'  Bank 
angrily  retorted  that  no  further  intercourse  could  be  held 
with  the  Bank  of  the  United  States,7  and  complained  that 
"dissatisfaction  or  irritation  against  the  government  in 
Georgia"  arose  only  when  "this  mammoth  came  here  to 

1 "  Still  they  curtailed  their  discounts  and  did  no  new  business,  except  in  the  pur- 
chase of  bills  of  exchange  on  the  north,  .... 

"  The  Bank  of  Georgia  paid  interest  under  the  agreement.  This  bank  continued 
to  import  and  buy,  at  a  considerable  premium,  specie  to  pay  the  excesses." — Rich- 
ardson to  Crawford,  July  21, 1821,  ibid.,  p.  1068. 

2  "The  experiment  has  been  made  and  found  to  fail.    After  six  months'  experi- 
ence (during  which  every  sacrifice,  short  of  closing  their  doors,  has  been  made  to 
enable  them  to  maintain  their  intercourse  with  your  office)  the  State  banks  find  them- 
selves in  a  worse  situation  than  before."— Richardson  to  President  Campbell,  June 
25, 1821,  ibid.,  p.  1070. 

3  J.  Marshall  to  John  Hunter,  June  22, 1821,  ibid.,  p.  1074. 

*"We  wish  you  to  refuse  our  paper  hereafter;  and  I  am  instructed  to  request 
that,  from  the  date  of  the  annullment  to  the  present  agreement,  it  may  not  be 
received  at  your  office  in  any  shape." 

The  Planters'  Bank  resolved  "  on  refusing  to  pay  its  bills  accumulated  by  the 
Bank  of  the  United  States,  unless  their  intercourse  can  be  conducted  on  the  liberal 
and  friendly  footing  which  prevails  among  the  State  institutions." — Richardson  to 
Campbell,  June  25, 1821,  ibid. 

5  Cheves  to  Crawford,  Aug.  25, 1821,  ibid.,  p.  958. 

8  Richardson  to  Crawford,  July  25, 1821,  ibid.,  p.  1071.  '  Ibid. 


88  THE  SECOND  BANK  OP  THE  UNITED  STATES 

destroy  our  very  substance.  Ships,  plantations,  negroes, 
wharves,  stores,  all  the  sources  of  wealth  of  the  state  have 
been  [devoured]  by  this  all  consuming  power! "  It  declared 
that  it  would  cash  no  more  of  its  notes  presented  by  the 
Bank  of  the  United  States.1 

Meanwhile,  the  Bank  of  the  State  of  Georgia  also 
annulled  the  agreement  of  January,  1821,  and  the  office 
refused  the  paper  of  both  banks.2  Attempts  to  collect  specie 
for  notes  held,  however,  met  with  determined  and  succesful 
resistance.  In  December,  1819,  the  state  legislature  had 
made  this  difficult  by  suspending  the  law  allowing  25  per 
cent,  damages  on  the  failure  of  the  state  banks  to  redeem 
their  notes  in  specie,  so  far  as  that  law  operated  in  favor  of 
the  Bank  of  the  United  States,3  and  in  December,  1821,  it 
totally  precluded  the  bank  from  recovering  specie  on  such 
notes  by  enacting  that  after  January  1,  1822,  state-bank 
notes  held  by  the  Bank  of  the  United  States  "  shall  not  be 
redeemable  in  specie,"  unless  the  person  presenting  them 
should  swear  that  the  notes  were  not  procured  by  the  bank 
"  for  the  purpose  or  with  any  intent  ....  to  demand  or  to 
draw  specie  "  from  the  bank  issuing  the  notes.* 

The  business  of  the  Savannah  branch  rapidly  fell  away. 
In  January,  1822,  Biddle  was  informed  that  "  not  a  single 
deposit  is  made  in  it  nor  do  they  discount  a  dollar  but  in 
renewal  of  paper," 5  and  by  the  close  of  1824  it  was  almost 
totally  deprived  of  business.6 

1  Richardson  to  Crawford,  July  21, 1821,  F.,  Vol.  IV,  pp.  1069, 1070. 

2  Cheves  to  Crawford,  Aug.  25, 1821,  ibid.,  p.  958. 

3  Dec.  18, 1818.— LAMAE,  Laws  of  Georgia  (1810-19),  p.  1206. 

*  Enacted  Dec.  24, 1821.— Laws  of  Georgia  (Dawson's  Compilation),  pp.  70,  71. 

6  S.  Nicholas  to  Biddle,  Jan.  14, 1822,  Biddle  Papers. 

6  Reduction  of  the  business  of  the  Bank  of  the  United  States  in  Georgia : 

Oct.,  1820  Dec.,  1824 

Deposits  of  individuals $   112,562          $  39,896 

Domestic  bills  discounted        -       ...  55,896  6.070 

Bills  and  notes  discounted 1,157,054  448,125 

Bills  on  stock  pledged 29,860  6,590 

Balances  due  from  state  banks  reduced  from  $75,724  to  $10,862.— NILES,  Vol. 
XXVIH,  p.  116,  April  23, 1825. 


ADMINISTRATION  OP  LANGDON  CHBVES          89 

The  directors  promptly  inaugurated  suit  against  the 
Planters'  Bank  to  compel  it  to  pay  specie  for  its  notes,  and 
after  a  long  course  of  litigation  the  case  was  settled  in  the 
Supreme  Court  of  the  United  States  in  favor  of  the  bank.1 
Hereupon  the  Georgia  legislature,  in  December,  1824, 
repealed  the  obnoxious  law  permitting  the  state  banks  to 
refuse  specie  for  their  notes  to  the  Bank  of  the  United 
States,2  and  the  national  bank  was  once  more  enabled  to 
engage  in  profitable  banking  in  Georgia. 

The  same  opposition  and  the  same  state  of  public  feeling 
existed  elsewhere.  In  July,  1819,  the  Bank  of  Nashville  ap- 
pealed to  the  public  against  the  Bank  of  the  United  States  in 
an  address,  declaring  that  it  was  striving  to  "destroy  every 
state  bank."3  In  South  Carolina,  one  year  later,  a  deter- 
mined effort  was  made  to  establish  a  "  system  of  state  paper 
money,"  on  the  ground  that  the  Bank  of  the  United  States 
was  collecting  specie  for  bank  notes.*  In  all  the  western 
states  the  relief  system  went  into  effect  in  1819-20,  by 
which  the  bank,  in  common  with  other  creditors,  was  hin- 
dered from  collecting  its  just  debts.  In  Kentucky  a  court 
held  that  it  was  without  power  under  its  charter  to  pur- 
chase a  promissory  note  or  to  collect  on  such  note  if  pur- 
chased,5 a  decision  supported  by  the  court  of  appeals.6  The 
state  of  Ohio  waged  relentless  warfare  upon  the  bank. 
Undeterred  by  the  decision  of  the  Supreme  Court  in  the 
case  of  McCulloch  vs.  Maryland,  a  determined  effort  was 
made  to  collect  the  tax  laid  upon  the  branches  at  Chilli- 
cothe  and  Cincinnati.  The  statute  decreed  that  the  tax 

1  Bank  of  the  United  States  vs.  The  Planters'  Bank  of  Georgia,  9  WHEATON, 
904,  Feb.  term,  1824. 

2  Dec.  20, 1824,  Laws  of  Georgia  (Dawson's  Compilation),  p.  71. 

3  NILES,  Vol,  XVI,  p.  341. 

*  Cheves  to  Crawford,  July  12, 1820,  F.,  Vol.  IV,  p.  931. 

5  Bank  of  the  United  States  vs.  Norvell,  2  A.  K.  MARSHALL,  101,  fall  term, 
1819  (Kentucky  reports) ;  NILES,  Vol.  XVII,  p.  150. 

6/6id.,  p.  365.  The  court  reversed  this  opinion  in  1821.— Bank  of  the  United 
States  vs.  Norton,  3  A.  K.  MARSHALL,  422  (Kentucky  reports). 


90  THE  SECOND  BANK  or  THE  UNITED  STATES 

should  be  collected  by  the  authorities  of  the  state  on  the 
15th  of  September  of  every  year.  The  bank  consequently 
filed  a  bill  in  the  circuit  court  of  the  United  States  for  a 
writ  enjoining  the  auditor,  Osborn,  from  collecting  tKe  tax. 
The  injunction  was  issued,  but  was  not  secured  until  the 
18th,  though  the  auditor  had  been  notified  under  subpoena1 
that  it  had  been  granted.  He  therefore  proceeded  in  con- 
tempt of  the  court.  On  the  morning  of  the  17th  his  agents 
entered  the  branch  at  Chillicothe,  leaped  over  the  counter, 
seized  upon  the  vaults,  and  forcibly  collected  the  tax.2  The 
act  aroused  intense  excitement,  not  only  in  Ohio,  but  through- 
out the  Union.  Cheves  was  furious.  "The  outrage,"  he 
asserted,".  .  .  .  can  be  rarely  paralleled  under  a  Government 
of  law,  and,  if  sustained  by  the  higher  authorities  of  the 
State,  strikes  at  the  vitals  of  the  Constitution." 3  The  bank 
immediately  instituted  suits  against  Osborn  and  others  for 
contempt,  for  trespass,  and  to  recover  the  money  seized. 
The  legislature  of  Ohio  interposed,  and,  finding  that  the  bank 
would  not  drop  its  suits,  passed  an  act  in  January,  1821, 
"to  withdraw  from  the  Bank  of  the  United  States  the  pro- 
tection and  aid  of  the  laws  of  the  State  in  certain  cases," 
unless  the  bank  should  either  consent  to  pay  4  per  cent,  of 
the  profits  from  its  branches  in  Ohio  as  a  tax  to  the  state, 
or  withdraw  the  offices.4  In  February  of  the  same  year  it 
passed  a  further  act,  promising  to  restore  $90,000  out  of  the 
$100,000  seized  if  the  bank  would  drop  its  suits  and  agree 
to  pay  the  4  per  cent,  interest  henceforth,  or  remove  the 
branches.5  The  bank  was  inflexible,  and  in  September, 
1821,  the  circuit  court  of  the  United  States  for  Ohio  gave 
judgment  that  the  money  seized  should  be  returned  to  it, 

1  NELES,  Vol.  XVII,  p.  86;  9  WHEATON,  738. 

2  A.  G.  Claypoole  to  Crawford,  Sept.  17, 1819,  F.,  Vol.  IV,  p.  903. 

3  To  Crawford,  Sept.  30, 1819,  ibid.,  p.  905.    It  is  interesting  in  the  light  of  this 
sentence  to  recall  that  Cheves  was  a  determined  nullificr  in  1832. 

*  Statutes  of  Ohio,  Vol.  II,  pp.  1185, 1186,  chap.  519,  Jan.  29, 1821. 
5  Ibid.,  pp.  1198, 1199,  chap.  524,  Feb.  2, 1821. 


ADMINISTRATION  OP  LANGDON  CHEVES          91 

and  at  the  same  time  enjoined  the  state  from  collecting  the 
tax  henceforth.1  The  defendants  appealed  the  case  to  the 
Supreme  Court,  which  finally  disposed  of  it  in  the  February 
term,  1824,  affirming  in  all  essential  particulars  the  decision 
of  the  circuit  court.2 

This  narrative  of  dispute  and  discord  with  the  South  and 
West  will  give  some  idea  of  the  almost  insuperable  difficul- 
ties of  the  Bank  of  the  United  States,  while  it  was  slowly 
recovering  from  the  shameful  and  criminal  mismanagement 
of  its  early  years.  In  the  opinion  of  judges  so  competent 
as  J.  Q.  Adams  and  Rufus  King,  "  the  interest  of  the  stock- 
holders would  be  to  surrender  their  charter,"  the  govern- 
ment being  most  interested  in  "the  continuance  of  the 
Bank."8  Though  this  was  so,  the  government,  outside  of 
the  Treasury  Department,  showed  no  inclination  to  extend 
unusual  favors  to  the  Bank  of  the  United  States.  Requests 
to  allow  other  officers  to  sign  the  bank's  notes  and  to  per- 
mit the  election  of  directors  eligible  for  longer  than  three 
years  out  of  four  were  persistently  denied,4  though  in  the 
case  of  signing  notes  it  was  apparent  that  the  bank  could 
not  furnish  the  necessary  circulation  without  this  concession. 

By  1823  Cheves's  work  was  done,  and  he  could  safely 
retire.  Moreover,  his  restrictive  policy,  with  the  resulting 
meager  profits,  aroused  an  opposition  to  him  among  the 
directors  and  stockholders.  The  latter  became  "restive 
under  the  low  dividends"  which  they  received.5  It  is  not 

1  NILES,  Vol.  XXI,  p.  75. 

2  Osborn  et  al.  vs.  the  Bank  of  the  United  States,  9  WHEATON,  738.  Clay,  Webster, 
and  Sergeant  were  counsel  for  the  bank. 

s  ADAMS,  Memoirs,  Vol.  V,  pp  38,  39,  March  25, 1820. 

*  See  Report  of  the  Committee  of  Stockholders,  Nov.  5, 1819,  NILES,  Vol.  XVII,  p. 
166;  Bank  Memorial  of  Dec.  7, 1821,  F.,  Vol.  Ill,  p.  586;  Report  of  the  Committee  of 
Stockholders,  Oct.  1, 1822,  CHEVES,  p.  10,  and  NILES,  Vol.  XXIII,  p.  89. 

6  Crawford  to  Gallatin,  May  13, 1822;  ADAMS,  Gallatin's  Writings,  Vol.  II,  p.  244; 
CHEVES,  p.  9.  See  also  Cheves  in  answer  to  President  Cooper,  Aug.  18, 1837,  NILES, 
Vol.  LIII,  pp.  8,  9,  quoting  the  Charleston  Mercury,  where  Cheves  paints  in  warm 
colors  the  embarrassments  and  the  misery  of  his  position  because  of  the  clamor 
against  him. 


92  THE  SECOND  BANK  OP  THE  UNITED  STATES 

surprising  that  under  these  circumstances  he  was  willing  to 
lay  down  the  burden  of  the  presidency.  His  willingness  was 
increased  by  the  provincial  hostility  of  Philadelphia  to  him, 
based  upon  the  fact  that  he  was  not  a  Philadelphian.  As 
soon,  therefore,  as  he  felt  himself  justified  in  doing  so,  he 
announced  his  intention  of  resigning,1  declaring  that  it  was 
a  "determination"  "fixed  and  unchangeable,"  and  that  he 
had  always  intended  to  resign  as  soon  as  the  bank  was  once 
more  restored  to  its  first  integrity.  In  October,  1823,  he 
made  a  succinct  report  of  the  history  of  his  presidency,  and 
retired  from  the  control  of  the  institution. 

i  Made  public  July  1, 1822,  NUJSS,  Vol.  XXII,  p.  291. 


CHAPTER  V. 

NICHOLAS  BIDDLE  AND  HIS  POLICY,  1822-28. 

IN  January,  1823,  at  the  age  of  thirty-seven,  Nicholas 
Biddle,  a  member  of  an  old  and  distinguished  Phila- 
delphia family,  was  elected  president  of  the  bank,  there 
being  but  one  vote  against  his  nomination  for  the  office.1 
Biddle  was  a  graduate  of  Princeton  College,  was  a  proficient 
linguist,  and  had  been  secretary  to  Armstrong  at  Paris  and 
to  Monroe  at  London.  Returning  from  Europe  in  1807,  he 
had  devoted  himself  to  the  law  and  practiced  for  several 
years.  In  1811  he  was  elected  to  the  Pennsylvania  senate. 
Meanwhile  he  cultivated  literature,  contributing  extensively 
in  both  prose  and  verse  to  Dennie's  Portfolio,  and  edit- 
ing Lewis  and  Clarke's  Journal  and  later  a  Commercial 
Digest.  In  1819  Monroe  appointed  him  a  government 
director  of  the  Bank  of  the  United  States.  Having  a  taste 
for  economic  subjects,  and  being  thoroughly  read  in  Smith, 
Ricardo,  and  the  French  economists,  he  threw  himself  with 
enthusiasm  into  the  study  of  banking  and  monetary  ques- 
tions, and  was  soon  one  of  the  most  prominent  members  of 
the  board.  He  was  a  man  of  eminent  tact,  conciliatory  in 
temper,  versatile,  untiringly  industrious,  quick  of  appre- 
hension and  quick  to  act,  strong-willed  and  tenacious  of 
his  own  opinions.  His  prominent  fault  was  the  possession 
of  an  over-sanguine  temper.  On  the  whole,  it  would  have 
been  difficult  to  secure  a  more  capable  man  for  the  position. 

Immediately  upon  his  election,  Biddle  was  advised  by 
Robert  Lenox,  of  New  York,  a  conservative  merchant  of  the 
first  standing  and  a  trusted  director  of  both  the  first  and 

i  NILES,  Vol.  XXIII,  p.  209,  Dec.  7, 1822. 

93 


94  THE  SECOND  BANK  OP  THE  UNITED  STATES 

the  second  banks  of  the  United  States,  to  select  confidential 
advisers  at  the  various  branches,  who  should  keep  him 
informed  of  the  affairs  of  the  offices.1  The  advice  was  taken. 
Lenox  himself  became  Biddle's  most  intimate  and  confiden- 
tial adviser  in  regard  to  New  York  business,  the  affairs  of 
the  office  there,  and  the  character  and  ability  of  its  officers 
and  directors.  At  Boston,  James  Lloyd  and  Daniel  Webster 
acted  in  a  similar  capacity;  at  Charleston,  Robert  Patter- 
son and  John  Potter;  at  Baltimore,  John  McKim,  Jr.,  Robert 
Oliver,  and  R.  L.  Colt  —  men  who  had  been  prominent  in 
rescuing  the  office  in  that  city  from  the  destroying  grasp  of 
Buchanan.2 

It  is  commonly  asserted  that  Biddle  represented  a  new 
and  radical  policy  as  against  the  conservative  system  pur- 
sued by  Cheves,  the  intimation  being  that  he  was  inclined 
to  rash  and  unsound  banking.  There  is  no  evidence  what- 
ever for  this  opinion,  and  none  could  be  more  mistaken. 
That  he  represented  a  new  policy  may  be  conceded,  but  it 
was  far  from  being  radical,  and  in  some  instances  it  appears 
even  more  conservative  than  that  previously  obtaining.  In 
two  important  respects  he  differed  materially  in  opinion 
from  Cheves:  He  believed  that  the  rule  compelling  the 
supersession  of  a  director  for  one  year,  after  he  had  sat  con- 
secutively for  three  years,  was  an  excellent  one,  because  it 
furnished  a  means  of  excluding  an  objectionable  member  of 
the  board  without  arousing  his  enmity ;  while,  in  case  of  a 
desirable  director,  the  seat  could  be  held  for  a  year  by  some 
relative,  friend,  or  member  of  the  same  firm,  the  director 
returning  to  the  board  at  the  expiration  of  the  year.3  He 
also  believed,  as  against  Cheves,  that  the  receipt  of  all  the 

1  Feb.  6, 1823,  B.  P. 

2  For  an  acknowledgment  of  this  aid  rendered  by  Oliver  and  McKim  see  CHEVES, 
p.  18.    Colt  was  his  trusted  agent  at  Baltimore. — HASKELL,  "  Langdon  Cheves  and 
the  United  States  Bank,"  Report  American  Historical  Association,  1896,  Vol.  I,  p.  366. 

3  Biddle  to  Gallatin,  July  29, 1830,  President's  Letter  Book,  Vol.  in,  p.  306. 


NICHOLAS  BIDDLE  AND  His  POLICY  95 

notes  of  the  bank  everywhere  in  payment  of  the  government 
revenue  need  not  be  restrictive  of  the  bank's  transactions.1 
In  neither  instance  could  the  difference  of  opinion  be 
regarded  as  wildly  radical. 

On  the  contrary,  Biddle  in  the  early  years  of  his  presi- 
dency proved  himself  thoroughly  conservative.  In  one  of 
his  first  official  letters  as  president  of  the  corporation  he 
shows  this  clearly:  "  We  have  had  enough,"  he  wrote,  "and 
more  than  enough  of  banking  in  the  interior.  We  have 
been  crippled  and  almost  destroyed  by  it.  It  is  time  to 
concentrate  our  business  —  to  bank  where  there  is  some  use 
and  some  profit  in  it,  ....  to  make  at  present  the  large 
commercial  cities  the  principal  scene  of  our  operations."2 
Nothing  could  be  less  radical  or  revolutionary  than  this. 
The  perilous  western  and  southern  business  was  to  be  sur- 
rendered, and  the  capital  of  the  bank  employed  where  its 
employment  would  be  most  useful  and  safe  —  in  the  large 
cities  along  the  Atlantic  coast.  In  pursuance  of  this  plan, 
the  office  at  New  York  was  made  the  center  of  extensive 
operations,  being  instructed  to  secure  all  the  good  paper  it 
possibly  could,  while  the  funds  of  the  bank  were  so  man- 
aged as  to  protect  it  against  inimical  action  by  state  banks 
and  brokers.3  To  make  this  possible,  the  office  was  to  cease 
the  issue  of  state-bank  notes,  using  its  own  exclusively;  to 
reduce  the  balances  of  the  city  banks  due  to  it,  and  compel 
them  to  settle  all  their  debts  in  specie  at  least  once  a  week.4 
The  plan  of  operations  thus  outlined  for  the  New  York 

1  Report  of  Committee  of  Stockholders,  Sept.  1, 1828,  NILES,  Vol.  XXXV,  p.  74. 

2  To  R.  Lenox,  Feb.  3, 1823,  P.  L.  B.,  Vol.  I,  p.  5  (confidential).  3  ibid. 
*  That  office  has  "  for  nearly  a  year  been  occupied  chiefly  in  Banking  at  second 

hand  on  the  notes  of  the  State  Banks  who  have  of  course  been  largely  their  debtors. 
This  is  a  state  of  things  not  to  be  tolerated,  and  accordingly  an  effort  has  been 
directed,  to  discontinue  the  special  deposit  of  State  Bank  paper,  to  cause  weekly 
settlements  with  the  State  Banks,  and  then,  when  this  operation  combined  with  the 
return  of  the  season  of  business  shall  have  produced  its  proper  effect  on  the 
exchanges,  to  remit  it  in  payment  of  their  Northern  debts.  While  this  movement 
is  going  on  we  wish  to  keep  the  office  strong  till  the  crisis  is  over." — Biddle  to 
John  White,  of  Baltimore,  Feb.  19, 1823,  ibid..  Vol.  I,  p.  11. 


96  THE  SECOND  BANK  OP  THE  UNITED  STATES 

office  was  consistently  pursued,  in  spite  of  the  pertinacious 
and  bitter  resistance  of  the  New  York  banks,  which  opposed 
particularly  the  plan  of  weekly  liquidation  of  balances.1 

While  a  more  extensive  business  was  being  created  at 
New  York,  the  exchange  operations  at  the  New  Orleans 
office  were  placed  upon  a  sounder  footing.  Of  all  the 
offices,  this  did  the  most  considerable  amount  of  busi- 
ness, especially  in  exchange,  and  was  the  center  of  all  the 
banking  operations  of  the  West  and  Southwest.  The 
exchange  operations  here  had  been  conducted  in  such  a 
manner  as  to  be  almost  unprofitable,  while  the  same  accom- 
modations might  be  rendered  to  individuals  at  the  New 
York  office,  if  it  were  strengthened  and  provided  with  funds 
from  the  New  Orleans  branch.2  In  other  words,  Biddle 
wished  to  unify  completely  the  various  business  centers  of 
the  bank. 

Biddle's  management  during  his  entire  presidency  turned 
around  these  two  measures  of  collecting  state-bank  balances 
and  issuing  the  bank's  own  notes.  His  plans  for  increasing 
business  were  all  based  upon  an  enlargement  of  the  issues — 
by  means  of  which  the  greater  part  of  the  discounts  was 
necessarily  made  at  that  day.  Since  Cheves  had  believed  the 
issues  dangerous,  because  they  were  received  everywhere 
in  payments  to  the  government  and  thus  would,  in  his 
opinion,  compel  the  retention  of  a  specie  fund  much  larger 
than  the  total  note  circulation,  the  bank  had  hitherto  been 

1  B.  Lenox  to  Biddle,  Feb.  21, 1823,  B.  P.    Biddle  to  I.  Lawrence,  of  New  York, 
Jan.  6, 1824,  P.  L.  £.,  Vol.  I,  p.  96. 

2  "  We  have  made  also  a  vigorous  effort  to  correct  the  exchange  operations  of  the 
New  Orleans  office  which  during  the  last  year  were  conducted  on  principles  equally 

unsound  and  unprofitable For  instance  the  office  at  New  York  collects  on 

New  Orleans  at  3  per  cent.    But  as  the  exchange  is  now  conducted  the  office  at  New 
Orleans  repays  it  in  60  or  90  day  bills  at  par  without  interest.    Allowing  them  the  30 
days  for  transmission,  the  60  day  bills  are  in  fact  at  Vt  and  the  90  day  bills  at  2.    So 
that  really  the  profit  is  scarcely  a  compensation  for  the  risk  and  trouble,  even  when 
you  receive  your  funds  back  immediately."    Sometimes  they  remain  "  for  a  consid- 
erable time  at  New  Orleans."— Biddle  to  White,  of  Baltimore,  Feb.  19, 1823,  ibid., 
p.  11. 


NICHOLAS  BIDDLE  AND  His  POLICY  97 

accustomed,  when  making  discounts,  to  issue  the  notes  of 
state  banks  instead  of  presenting  them  for  collection.  The 
result  was  undesirable  in  several  ways:  the  bank  furnished 
little  currency  to  the  West  and  South ;  a  very  necessary  check 
upon  the  state  banks  was  removed ;  the  bank  was  deprived  of 
the  profits  accruing  from  the  circulation  of  notes;  and  the 
adequate  increase  of  discounts  was  rendered  impossible.  In 
Biddle's  plan  of  operations  the  fundamental  consideration, 
therefore,  was  the  increase  of  the  bank's  circulation.  He 
believed  that  the  notes  might  safely  be  issued,  despite  the 
necessity  of  paying  them  everywhere  on  government  account, 
if  only  he  could  put  an  end  to  the  depreciation  of  state-bank 
notes.  This  was  logical,  for,  if  state-bank  notes  were  unde- 
preciated, the  bank's  issues  in  the  localities  of  state  banks 
would  not  be  employed  as  bills  of  exchange,  and  would  not 
constantly  be  presented  for  specie  almost  as  soon  as  issued. 
The  state  banks  would,  in  brief,  be  compelled  to  bear 
their  share  of  specie  demands.  Biddle  insisted,  therefore,  on 
the  constant  settlement  of  state-bank  balances,  and  on  the 
issue  of  the  bank's  own  notes  instead  of  those  of  state  banks.1 
When  this  was  done,  the  branches  might  receive  each  other's 
notes  without  hesitation,  and  from  1823  the  notes  were 
received  much  more  freely  than  formerly.  At  Philadelphia 
the  issues  of  all  the  branches  were  indiscriminately2  taken. 
At  the  same  moment,  therefore,  that  these  methods  were 
applied  at  New  York,  they  went  into  effect  also  at  Phila- 
delphia,3 Richmond,  Savannah,  and  Charleston,*  and  by 
August,  1825,  Washington  was  the  only  office  not  conducted 

i  Report  of  Stockholders'  Committee,  Sept.  1, 1828,  NILES,  Vol.  XXXV,  p.  74. 

2 GOUGE  (Cobbett's  edition),  p.  136. 

3  "Every  morning  the  clerks  from  the  Bank  and  the  State  Banks  meet  to  inter- 
change the  notes  received  respectively  on  the  previous  day.  The  Balances  are  struck 
accordingly  —  but  no  Bank  ever  calculated  on  its  Balance  remaining  for  any  length 
of  time,  and  whenever  it  grows  a  little  too  large,  no  Bank  ever  hesitated  to  send  for 
ten  or  fifteen  or  twenty  thousand  dollars  from  its  debtors."— Biddle  to  C.  P.  White, 
of  New  York,  Feb.  3, 1823,  P.  L.  B.,  Vol.  I,  p.  6. 

<Biddlo  to  C.  J.  Nichols,  cashier  Richmond  office,  ibid.,  Vol.  I,  pp.  38-41. 


98  THE  SECOND  BANK  OF  THE  UNITED  STATES 

on  this  plan.  In  that  year  it  was  established  there.1  The 
attempt  was  not  wholly  successful,  however,  and  the  central 
authorities  were  compelled  on  several  occasions  to  call  the 
attention  of  the  officers  to  the  regulations  regarding  the 
issue  of  state-bank  notes.2  The  reasons  for  the  partial  fail- 
ure is  found  in  the  inability  of  the  president  and  cashier  to 
sign  sufficient  notes  for  the  offices.  The  problem  was  finally 
solved  by  the  creation  of  "branch  drafts." 

With  the  policy  of  issuing  only  the  notes  of  the  branches 
went  a  plan  for  expanding  the  discounts  and  purchase  of 
bills  of  domestic  exchange  in  the  South  and  West  instead  of 
discounting  on  personal  security  there.3  This  operation  was 
the  complemental  part  of  the  plan  for  increasing  the  busi- 
ness of  the  bank  in  the  interior  of  the  country.  The  issue 
of  the  branch  notes  and  the  purchase  of  exchange  were  opera- 
tions depending  upon  and  supporting  each  other.*  The  pro- 
ceeds from  the  bills  provided  a  fund  for  the  redemption  of 
the  note  issues  of  the  southern  and  western  offices,  and  thus 
made  possible  extensive  loans  in  those  sections  without 
incurring  the  danger  of  transferring  the  capital  thither  from 
the  other  offices.  On  the  whole,  the  success  was  encour- 
aging. The  note  circulation  at  the  beginning  of  Biddle's 
presidency  was  only  $4,432,000;  in  June,  1825,  it  was 
$6,740,000,  and  in  June,  1826,  $9,616,000.  Meanwhile  the 
operations  of  the  bank  were  enlarged  in  every  other  item. 

1 "  I  am  very  anxious  that  it  should  go  into  operation  with  you,  as  it  has  done 
everywhere  else  without  inconvenience  and  as  far  as  possible  without  producing  any 
excitement."—  Biddle  to  R.  Smith,  Aug.  26, 1825,  P.  L.  B.,  Vol.  II,  p.  42. 

2  Aug.  29, 1825,  Biddle  says  that  he  hears  that  the  Charleston  office  pays  out  state- 
bank  notes,  and  that  this  must  not  be  done. —  To  President  J.  Johnson,  ibid.,  p.  43. 
In  Jan.,  1827,  the  same  difficulty  existed  at  the  Pittburg  office.— Correy  to  Mcllvaine, 
Jan.  15, 1827,  B.  P. 

3  Increased  profits  due  to  "  measures  of  the  bank  which  had  for  their  object  the 
augmented  circulation  of  its  notes,  the  increase  of  private  deposites,  and  the  exten- 
sive purchase  of  domestic  exchange,  in  which  a  part  of  this  circulation  was  benefi- 
cially employed  in  the  southern  and  western  parts  of  the  union."—  See  Remarks  of 
Binney  at  Triennial  Meeting  of  Stockholders,  Sept.  1, 1825,  NILES,  Vol.  XXIX,  pp.  31, 
32,  Sept.  10, 1825. 

*  Report  of  the  Committee  of  Stockholders,  Sept.  1, 1828,  NILES,  Vol.  XXXV,  p.  74. 


NICHOLAS  BIDDLE  AND  His  POLICY  99 

The  increase  of  private  deposits  was  between  two  and  three 
millions  by  September,  1825.  The  discounts  on  notes  and 
domestic  bills  had  increased  to  about  the  same  extent,  while 
a  debt  of  $1,292,000  due  in  Europe  had  been  discharged.1 

The  attempt  to  secure  a  larger  circulation  was  intimately 
connected,  as  already  pointed  out,  with  the  plan  to  diminish 
the  issues  of  the  state  banks.  It  was  one  of  the  cardinal 
doctrines  in  Biddle's  banking  creed  that  the  big  corporation 
existed  for  the  purpose  of  furnishing  a  sound  currency  to  the 
whole  Union,  and  that  this  could  be  done  only  by  forcing 
the  state  banks  to  redeem  their  issues  in  specie  on  demand. 
The  bank  was  to  secure  this  end  by  keeping  itself  in  the 
position  of  a  creditor  bank.  Usually  it  maintained  this  rela- 
tion without  difficulty,  and,  on  the  slightest  appearance  of  a 
tendency  in  a  state  bank  to  expand  unduly,  checked  the 
movement  by  demanding  specie  for  its  notes,  though  some- 
times it  failed  to  keep  its  own  dealings  within  bounds,  and  at 
such  times  could  not  restrain  the  state  banks.  On  the  whole, 
however,  despite  the  growth  of  the  population,  the  increase 
of  business,  and  the  necessarily  enlarged  and  legitimate 
demands  for  banking  facilities,  the  state  banks  were  com- 
pelled to  redeem  their  notes  frequently,  and  the  currency 
showed  a  progressive  improvement,  which  was  very  encour- 
aging to  all  who  had  the  good  of  the  country  at  heart.  This 
the  directors  of  the  Bank  of  the  United  States  always  claimed 
and  justly  claimed,  to  be  due  to  its  efforts.2 

Biddle's  conservatism  and  ability  as  a  banker  are  also 
revealed  in  the  stress  which  he  constantly  laid  upon  the 
nature  of  the  paper  which  was  to  be  discounted  by  the  bank. 
The  loans  were  to  be  for  short  dates,  and  only  on  good  com- 
mercial paper.  The  New  York  office  was  instructed  to  loan 

i  Report  to  the  Stockholders,  triennial  meeting,  Sept.  1, 1825,  NH-ES,  Vol.  XXIX, 
p.  32. 

2McDuffie's  report  and  Gallatin's  article  lay  stress  upon  this  feature  of  the 
bank's  benefits  to  the  community.  See  Report  of  Stockholders,  Sept.  1, 1828,  NILES, 
Vol.  XXV,  p.  74. 


100  THE  SECOND  BANK  OF  THE  UNITED  STATES 

on  paper  at  only  60  and  90  days,  though  it  might  take  notes 
at  120  days  if  "beyond  all  exception,  and  for  a  good  cus- 
tomer." In  1825  the  same  directions  are  given,  in  answer 
to  a  request  of  the  president  of  the  branch  to  be  permitted 
to  extend  the  time  of  discount  because  he  felt  sure  that 
larger  profits  could  thus  be  secured.  "Let  us  not,"  urged 
Biddle,  "  by  the  hope  of  doing  better  or  getting  more  busi- 
ness risk  the  prosperity  and  safety  of  the  Institution."2 
Loans  must  be  confined  to  short-time  paper,  even  when 
demands  for  money  were  slack.3  Loans  on  real  estate  or 
stock  security  were  forbidden,  real  estate  not  being  fit  bank- 
ing security,  and  stock  loans  having  a  "  tendency  to  lock  up 
the  funds  of  the  Institution."  *  "  All  the  movements  of  the 
bank,"  asserted  Biddle,  "  are  governed  by  this  general  con- 
sideration."!  He  declined  making  a  long  loan  to  a  senator 
from  Louisiana,6  and  in  1827  he  refused  a  long  loan  on  real 
estate  to  an  old  and  intimate  friend,  who  had  been  a  trusted 
director  of  the  bank  and  of  the  Baltimore  office.  "  In 
relation  to  the  loan  you  suggest,"  he  wrote,  "I  am  satisfied 
that  it  would  not  be  done  here.  Our  great  object  is 
business  men  and  business  paper.  We  have  so  large  a 
part  of  the  capital  of  the  Bank  locked  up  in  real  estate 
that  we  are  obliged  to  keep  every  dollar  we  can  in  a  state 
of  activity — and  I  do  not  believe  that  a  loan  for  eighteen 
months,  however  well  secured  would  be  done  for  any 
body." T  The  evidence  is  conclusive  that  no  amount  of 
pressure,  no  considerations  of  gain,  no  ties  of  friendship, 
could  persuade  Biddle  in  these  first  years  of  his  presidency 

1  Biddle  to  Lawrence,  Oct.  13, 1823,  P.  L.  B.,  Vol.  I,  p.  55. 

2  Same  to  same,  May  12, 1825,  ibid.,  Vol.  II,  p.  22. 

3  To  the  president  of  the  Hartford  branch,  ibid.,  pp.  26,  27. 
*To  Lawrence,  Oct.  13, 1823,  ibid.,  Vol.  I,  p.  55. 

5  To  the  president  of  the  Hartford  office,  ibid.,  Vol.  II,  pp.  26,  27. 

«  Jan.  9, 1826.— Ibid.,  circa  90. 

f  To  John  McKim,  Jr.,  of  Baltimore,  Jan.  9, 1827,  ibid.,  p.  231. 


NICHOLAS  BIDDLE  AND  His  POLICY          101 

to  swerve  from  an  eminently  safe  and  conservative  course  of 
banking.1 

Equally  conservative  was  Biddle's  management  in  other 
respects.  He  repelled  a  proposition  to  erect  small  commit- 
tees to  make  a  certain  class  of  loans,  instead  of  leaving  all 
discounting  to  the  board.  The  bank,  he  declared,  had  lost 
much  by  "irregular  discounting,"  and  it  was  advisable  not 
to  risk  repeating  the  loss  by  creating  the  facilities  for  making 
such  loans.2  He  also  made  it  a  cardinal  point  of  his  policy 
to  get  rid  of  directors  who  were  "large  or  habitual  bor- 
rowers." It  was  difficult  to  refuse  them  accommodations 
while  they  remained  on  the  directorates,  and  consequently 
the  only  alternative  was  to  exclude  them,  which  was  con- 
sistently done.3 

The  crux  of  successful  management  lay,  however,  rather 
in  controlling  the  offices,  keeping  them  under  a  close  super- 
vision, while  allowing  them  to  engage  freely  in  banking 
operations.  Cheves's  method  of  solving  the  problem  had 
been  to  restrict  their  business,  in  many  cases  almost  com- 
pletely. While  no  loss  could  accrue  with  such  a  plan,  the 
Bank  of  the  United  States  might  almost  as  well  have  been 
non-existent,  so  far  as  the  West  and  Southwest  were  con- 
cerned. Biddle  justly  regarded  this  situation  as  intolerable, 
and  the  bank  an  admitted  failure  if  it  could  not  be  remedied. 
Consequently  he  evolved  new  and  stricter  measures  of  con- 
trol for  the  branches  preparatory  to  allowing  them  to 
increase  their  business.  When  the  directors  were  to  be 
chosen  for  the  offices,  he  dispatched  letters  to  his  intimate 
friends  and  advisers  in  the  neighborhood  of  the  offices, 

1  In  the  case  of  New  York  this  policy  was  relaxed  for  a  short  period  in  the  spring 
of  1827,  the  office  being  allowed  to  discount  at  six  months.    Lenox  objected  even  to 
this.— To  Biddle,  Dec.  20, 1827,  B.  P. ;  Biddle  to  Lenox,  Dec.  27, 1827,  P.  L.  B.,  Vol. 
II, p.  329. 

2  To  William  Gray,  president  Boston  office,  1823,  B.  P. 

3  To  James  Lloyd,  Feb.  16,  1825,  P.  L.  B.,  Vol.  I,  p.  209 ;  to  Cadwalader,  July  26, 
1826,  B.  P. 


102  THE  SECOND  BANK  OP  THE  UNITED  STATES 

soliciting  advice  as  to  the  situation  of  the  offices,  and  particu- 
larly as  to  the  condition  of  the  vacancies.  The  presidents 
and  cashiers  of  the  branches  were  likewise  called  upon  for 
information,  their  recommendations  being  given  especial 
weight,  since  it  was  a  point  of  prime  importance  that  a 
branch  board  should  act  in  friendly  conjunction  with  its 
executive  officers.  In  case  a  new  president  was  to  be  elected 
at  a  branch,  the  central  board  undertook  to  designate  the 
individual  of  its  choice  by  placing  his  name  at  the  head 
of  the  list  of  directors  forwarded  to  the  office.  Though  the 
election  of  the  branch  president  was  by  charter  provision 
exclusively  in  the  control  of  the  branch  directorate,  the  inti- 
mation of  the  central  board  was  very  rarely  neglected.  The 
matter  was  of  considerable  importance,  since  it  gave  the 
bank  a  surer  control  of  its  offices  and  secured  presidents 
who  had  the  confidence  of  the  board  at  Philadelphia.1 

In  1825 2  Biddle  evolved  still  another  plan  for  strength- 
ening the  branch  directorates  and  checking  any  tendency 
to  perilous  vagaries  in  business.  This  consisted  in  empow- 
ering the  directors  of  the  parent  board  resident  in  cities 
where  branches  existed  to  sit  at  the  local  boards,  with  the 
right  to  advise  and  discuss,  though  not  to  vote.3  Naturally 
a  director  so  situated,  acting  as  the  agent  of  the  central 
board,  scrutinized  keenly  the  methods  of  the  local  director- 
ate, the  loans  made,  and  the  policy  pursued.  The  advan- 

1 "  From  the  organization  of  the  institution,  the  president  of  an  office  is  neces- 
sarily charged  by  the  Parent  Board  with  the  general  superintendence  of  its  affairs, 
he  is  chiefly  relied  on  by  the  parent  Board  in  selecting  the  other  Directors  of  the 
office,  he  is  in  fact  a  confidential  officer  of  the  parent  Board.  In  any  estimate 
then  of  the  qualifications  of  candidates  for  the  Office,  his  acceptability  to  the  parent 
Board  with  whom  he  is  at  once  to  contract  relations  of  very  intimate  confidence,  is 
a  circumstance  to  which  some  weight  may  naturally  be  attached."— Biddle  to 
William  Wirt,  Jan.  30,  1824,  P.  L.  B.,  Vol.  I,  p.  121 ;  also  Biddle  to  S.  Wheaton,  of 
Providence,  Sept.  19, 1826,  ibid.,  Vol.  Ill,  p.  183. 

2  Biddle  to  Lawrence,  June  13, 1834,  ibid.,  Vol.  V,  p.  229. 

3  "  But  for  the  last  few  years  the  practice  and  an  excellent  one  it  is,  nas  been 
for  the  Parent  Directors  to  sit  at  the  office  Board  as  regularly  as  if  they  were  members 
of  it— and  do  every  thing  but  vote."  —  Biddle  to  George  Hoffman,  of  Baltimore,  Oct. 
27, 1829,  ibid.,  VoL  III,  p.  79. 


NICHOLAS  BIDDLE  AND  His  POLICY          103 

tages  accruing  from  this  plan  were  most  marked  at  the  large 
offices  of  the  East  and  South,  since  non-resident  directors  of 
the  central  board  were  almost  invariably  selected  at  these 
places. 

The  authority  of  the  central  board  was  further  strength- 
ened by  clearly  defining,  while  enlarging,  the  functions  of 
the  branch  cashier.  "My  own  theory  of  the  administration 
of  the  Bank,"  wrote  Biddle,  "and  my  uniform  practice,  is  to 
consider  the  Cashier  of  an  Office,  as  the  confidential  officer 
of  this  Board,  to  rely  on  him  and  to  hold  him  responsible 
for  the  execution  of  their  orders;"  he  must  obey  orders  from 
Philadelphia  even  to  the  extent  of  disobeying  the  local 
board,  if  necessary,1  and  he  must  keep  both  the  central 
office  and  the  other  branches  thoroughly  informed  of  those 
transactions  which  it  was  to  their  interest  to  know.2  Better 
branch  cashiers  were  also  secured  by  selecting  all  the  new 
appointees  from  among  the  trusted,  thoroughly  known  offi- 
cials who  had  been  trained  at  the  bank  in  Philadelphia. 
Such  cashiers  were  intimately  acquainted  with  the  policy 
and  machinery  of  the  bank ;  their  honesty  had  been  tested ; 
their  characters  were  known;  they  were  not  open  to  the 
temptation  of  making  loans  to  assist  friends  and  relatives, 
since  they  had  neither  friends  nor  relatives  in  the  localities 
in  which  they  were  settled.3  They  were  likely  to  obey 

1  Biddle  to  C.  L.  West,  cashier  at  New  Orleans,  May  17, 1823,  ibid.,  Vol.  I,  p.  27. 

2 "Since  you  were  in  the  Bank  before,  its  discipline  is  much  improved  and 
we  are  in  the  habit  of  receiving  and  requiring  (from  all  its  officers  constant  and 
frequent  communications.  These  are  essential  to  the  good  administration  of 
the  Bank  —  the  basis  of  all  our  measures  being  of  course  accurate  knowledge  of 

facts My  present  purpose  is  to  invite  your  attention  to  a  constant  and  regular 

correspondence  which  cannot  be  too  frequent  and  detailed." — Biddle  to  George  Poe, 
of  Mobile,  Jan.  10, 1827,  ibid.,  Vol.  II,  pp.  233,  234. 

3 "The  Policy  of  the  Bank  has  been  in  the  appointment  of  confidential 
officers  to  live  at  a  distance  and  to  execute  such  important  trusts  to  take  in  prefer- 
ence Officers  brought  up  in  the  Bank  under  our  own  eye  whose  character  and  conduct 
were  known  to  us,  and  afford  the  best  guarantee  of  their  capacity  to  carry  into  effect 
the  system  of  the  Bank  with  which  they  are  familiar.  I  have  long  been  satisfied  that 
this  is  the  true  policy  of  the  Bank  and  I  think  it  will  be  pursued  in  case  a  Branch  is 
established  at  Portland.  The  observation  applies  of  course  only  to  the  cashier. 
The  other  officers  are  appointed  by  the  Directors  of  the  Branch."— Biddle  to  John 


104  THE  SECOND  BANK  OF  THE  UNITED  STATES 

orders  promptly  and  to  keep  a  careful  lookout  for  the  gen- 
eral interests  of  the  bank,  since  they  knew  that  future  pro- 
motion depended  upon  the  officials  at  Philadelphia  and  not 
upon  the  local  directorates.  To  diminish  still  further  the 
temptation  of  the  cashier  to  act  as  the  mere  creature  of  the 
local  board,  that  officer  was  forbidden  to  borrow  from  the 
offices.  The  same  prohibition  applied  to  the  subordinate 
officials  as  well.1  These  rules  were  correct,  and  their  results 
were  excellent.  Before  their  adoption  the  bank  had  suffered 
severely  from  the  peculations  of  branch  cashiers  and  other 
officials,2  as  well  as  from  the  tendency  of  these  to  act  with 
the  local  boards  in  making  objectionable  loans.  It  was 
found,  too,  that  variations  from  these  rules  during  Biddle's 
administration  resulted  disastrously.3 

Further  means  of  securing  complete  control  of  the  offices 
were  devised  by  the  creation  of  two  assistant  cashiers  in 
February,  1826.  The  first  of  these  was  to  supervise  the 
business  of  the  branches,  especially  to  secure  a  knowledge 
"of  the  accounts  between  the  offices,"  of  which  the  bank  had 
never  before  possessed  sufficient  information,  and  to  super- 
intend the  exchange  business.  This  officer  was  to  keep  up 
a  constant  correspondence  with  the  branches  and  make  fre- 
quent trips  of  inspection.*  The  other  assistant  cashier  was 
to  take  charge  of  the  suspended  debt  of  the  bank  and  of  the 
bank's  real  estate.5  The  reports  of  the  bank  show  that  the 

P.  Boyd,  of  Boston,  Nov.  23,  1826,  P.  L.  B.,  Vol.  H,  p.  209;  same  to  John  McKim,  of 
Baltimore,  Dec.  26, 1826,  ibid.,  pp.  219, 220.  In  letter  to  Baltimore  Biddle  points  out 
that  the  cashier's  being  without  "  connexions"  is  "  a  positive  recommendation." 

1  John  Potter  to  Biddle,  Charleston,  Feb.  27, 1827,  B.  P. 

2  Cases  in  point  were  at  Baltimore,  Richmond,  New  Orleans,  and  Middletown. 

3  The  Nashville  cashier  was  appointed  from  the  neighborhood,  and  the  Nash- 
ville branch  was  the  center  of  bad  banking  in  the  West. 

*"  Again,  we  have  never  had  a  sufficient  knowledge  of  the  accounts  between  the 

offices We  wish  to  examine  these  accounts,  and  we  wish  also  to  have  our 

Exchange  business  particularly  well  managed.  We  have  therefore  appointed 
another  officer  for  these  two  purposes." — Biddle  to  John  McKim,  Jr.,  of  Baltimore, 
March  14, 1826,  P.  L,  B.,  Vol.  II,  p.  140. 

5  Ibid.    See  Appendix  III,  Rules  and  Regulations  of  the  Bank,  rules  19,  20. 


NICHOLAS  BIDDLE  AND  His  POLICY          105 

suspended  debt  and  real  estate  were  carefully  and  profit- 
ably managed,  while  the  Biddle  correspondence  proves  that 
the  duties  of  the  assistant  cashier  in  inspecting  the  branches 
were  faithfully  discharged.  Biddle  himself  attached  so 
"  much  importance  "  to  thorough  inspection  that  on  several 
occasions  he  took  tedious  trips  through  the  country  in  order 
personally  to  inspect  the  branches.1 

To  secure  thorough  supervision  it  was  necessary  to  have 
at  Philadelphia  a  cashier  watchful,  completely  informed,  and 
energetic,  since  this  officer  was  in  closest  touch  with  the 
branches.  Thomas  Wilson,  who  had  been  cashier  since 
1820,  was  apparently  superannuated  ;  at  any  rate,  he  did  not 
give  complete  satisfaction  ;2  and  therefore  he  was  tactfully 
shifted  to  New  Orleans,  while  in  his  place  was  appointed  a 
younger  and  abler  man,  Mr.  William  Mcllvaine,  of  Phila- 
delphia.3 Mcllvaine  was  an  excellent  officer,  thoroughly  in 
sympathy  with  his  head,  tactful  and  conservative,  and  watch- 
ful of  the  interests  of  the  bank.  He  remained  in  office  until 
July,  1832,  when  he  resigned. 

These  various  measures  resulted  in  diminishing  very 
materially  the  amount  of  fraud  which  had  been  practiced 
upon  the  bank,  and  in  securing  much  better  business 
methods,  and  above  all  they  made  possible  the  adoption  of 
a  policy  of  expansion  in  the  bank's  business. 

Biddle  laid  particular  stress  upon  the  accumulation  of  a  sur- 
plus. Since  Cheves's  entire  administration  had  been  devoted 

i "  I  am  about  leaving  Philadelphia  in  a  day  or  two  to  accomplish  what  I  have 
wanted  to  do  for  three  years  but  could  never  find  leisure.  I  mean  a  personal  inspec- 
tion of  the  offices.  I  shall  begin  with  those  in  the  North  which  are  easy  of  access, 
and  the  more  distant  offices  will  be  afterwards  inspected  by  some  of  our  own  Officers 
—I  attach  much  importance  to  (.his  measure  and  will  endeavor  to  execute  it  thor- 
oughly."—Biddle  to  J.  Potter,  of  Princeton,  July  26,  1826,  P.  L.  B.,  Vol.  II,  p.  179. 
Other  trips  were  taken  in  1829.  Cadwalader  and  Colt  visited  western  offices. — 
Biddle  to  Webster,  Feb.  26,  1827,  ibid.,  p.  248. 

*  H.  R.  460,  22d  Cong.,  1st  Sess.,  p.  128. 

3  Wilson  was  transferred  in  January.— NILES,  Vol.  XXIX,  p.  289;  Biddle  to  R. 
Gilmor,  of  Baltimore,  announcing  Mcllvaine's  election,  Feb.  3, 1826,  P.  L.  £.,  Vol.  II, 
p.  112. 


106  THE  SECOND  BANK  OP  THE  UNITED  STATES 

to  the  task  of  restoring  the  original  capital  of  the  bank,  no 
surplus  fund  had  been  provided.  In  January,  1823,  accord- 
ing to  Biddle,  there  was  not  "a  dollar  of  reserved  profits," 
though  in  his  opinion  it  was  "of  the  utmost  importance  to 
have  some  provision  against  current  losses,  so  as  to  preserve 
the  dividend  from  fluctuation." '  From  the  beginning  to 
the  end  of  his  presidency,  therefore,  he  never  ceased  his 
efforts  to  accumulate  a  surplus  that  would  make  the  bank 
safe  and  strong  in  all  contingencies.  All  profits  from  the 
sale  of  bank  stock  forfeited  during  the  troublous  regime  of 
William  Jones,  all  collections  of  interest  upon  the  suspended 
debts,  went  uniformly  to  this  fund.  By  July,  1825,  the  sur- 
plus exceeded  $550,000,  and  it  steadily  increased  until  at 
the  expiration  of  the  charter  it  was  over  $6,000,000. 

Biddle's  management  of  the  bank  in  these  early  years 
was  thoroughly  tested  and  approved  by  the  stringency  of 
1825.  He  always  claimed  that  it  was  the  action  of  the 
Bank  of  the  United  States  alone  which  saved  the  country 
in  that  year  from  serious  losses.  In  1824  business  was 
slack,  and  instead  of  putting  funds  into  long  loans,  as  he 
might  profitably  have  done,  Biddle  secured  government 
stock  for  which  there  was  always  a  market.2  When  1825 
brought  brisk  demands  for  money,  he  was  cautious  of  meet- 
ing them,  arguing  that "  the  unexpected  and  sudden  increase  of 
the  demands  for  that  trade  ....  requires  that  we  should  be 
circumspect  at  the  present  moment." 3  Watching  the  market 
and  the  monetary  affairs  of  the  world  with  intent  care,  he 
clearly  foresaw  the  approach  of  the  pressure  of  1825  and 
began  to  prepare  for  it.4  In  May  he  wrote  to  Lawrence,  of 

1  Biddle  to  James  Lloyd,  of  Boston,  July  5, 1825,  P.  L.  B.,  Vol.  II,  p.  28. 

2  Seeing  that  business  would  be  slack  in  this  year,  the  bank  had  thought  it "  very 
desirable  to  place  as  much  of  the  funds  of  the  Bank  as  possible  in  the  late  loan." — 
Biddle  to  Kobert  Qilmor,  of  Baltimore,  June  23,  1824,  ibid.,  Vol.  I,  pp.  165-7.     The 
bank  took  government  loans  to  the  extent  of  $10,000,000  in  1824-25.— .4.  of  C.,  18th 
Cong.,  1st  Sess.,  Vol.  H,  Appendix,  pp.  3228,  3229,  3249-51.    Acts  of  May  24  and  May  26. 

3  To  John  White,  of  Baltimore,  April  15, 1825,  P.  L.  B.,  Vol  II,  p.  12. 

*  Instructions  to  President  I.  Lawrence  of  the  New  York  office,  April  22, 1825,  p.  18. 


NICHOLAS  BIDDLE  AND  His  POLICY          107 

New  York,  that  the  demand  was  the  result  of  "wild  and 
exaggerated  speculation,"  and  that  the  bank  must  not  be 
carried  away  by  it.1  As  the  year  passed  the  pressure 
increased,  and  panic  began  to  develop.  In  England  a  com- 
mercial crisis  of  the  most  tremendous  proportions  carried 
ruin  everywhere,  and  in  the  United  States  the  alarm  was  so 
great  that,  according  to  Gouge,  "  one  of  the  directors  "  of  the 
Bank  of  the  United  States  "  talked  publicly  on  the  Exchange 
at  Philadelphia  of  the  expediency  of  suspending  specie  pay- 
ments."2 Whoever  this  director  may  have  been,  certainly 
the  president  of  the  bank  was  not  of  his  opinion,  for  he  had 
resolved  to  ward  off  any  such  disaster.  In  September  the 
discounting  of  loans  on  a  pledge  of  bank  or  government 
stocks  was  approved,3  as  giving  relief  to  merchants  holding 
such  stocks  and  unable  to  find  a  market  for  them.  Unfor- 
tunately the  bank  at  this  moment  was  compelled  to  act  with 
extreme  circumspection,  because  it  had  to  expend  on  the  1st 
of  October  $7,000,000  of  the  public  funds  in  redemption  of 
the  national  debt.  This  brought  it  into  debt  to  the  state 
banks  of  Philadelphia,  and  thus  prevented  any  pronounced 
expansion  of  its  business.  To  extricate  itself  the  bank  sold 
large  portions  of  its  own  and  the  government  stock  in  its 
possession  in  order  to  increase  its  supply  of  specie.  By  the 
first  of  November  it  was  once  more  the  creditor  of  the  state 
banks.*  Though  compelled  to  proceed  with  caution  and  dis- 
cretion, the  bank  did  not  contract.  "  Solvent  persons  in 
good  credit,"  wrote  Biddle,  "can  get  as  much  as  they  want 
at  6  per  cent." !  In  New  York,  which  was  the  center  of  the 
excessive  pressure,  Biddle  arranged  for  the  substitution  of 
paper  for  demands  made  there  for  specie,6  and  instructed 

1  Ibid.,  p.  22,  May  12, 1825.  2  GOUGE  (Cobbett's  edition) ,  p.  142. 

3  Biddle  to  Walter  Bowne,  of  New  York,  Sept.  4, 1825,  P.  L.  B.,  Vol.  II,  pp.  45,  46. 

*  For  these  details  see  H.  R.  460,  22d  Cong.,  1st  Sess.,  pp.  60,  61,  254,  434,  435. 
The  amount  of  government  stock  sold  by  the  bank  in  October  was  over  $2,100,000,  of 
its  own  stock,  $160.054.16. 

5  To  Edward  Jones,  of  Washington,  Oct.  7, 1825,  P.  L.  B.,  Vol.  II,  p.  56. 

«H.  R.  460,  22d  Cong.,  1st  Sess.,  p.  435. 


108  THE  SECOND  BANK  OF  THE  UNITED  STATES 

the  office  at  that  place  to  increase  its  loans,1  which  was  done 
immediately  to  the  extent  of  $50,000.2  This  wise  policy  was 
continued  throughout  the  rest  of  the  year,3  being  deliberately 
adopted  as  the  most  effective  method  of  quieting  alarm.4 
It  must  always  be  a  tribute  to  Nicholas  Biddle's  skill 
and  foresight,  his  conservatism  and  enlightenment,  that  at 
the  moment  aid  was  needed  the  Bank  of  the  United  States 
was  able  to  render  it.  It  had  pursued  in  previous  years  a 
sober  and  conservative  plan  of  operations ;  its  loans  were  out 
on  short  paper,  its  supply  of  specie  was  large,  its  means  were 
completely  at  its  disposal,  and  its  credit  was  unshaken.5 

It  will  be  remembered  that  Cheves  had  reduced  the  bank's 
capital  by  retaining  the  shares  of  its  stock  which  had  been 
surrendered  in  1819,  and  that  he  had  advised  the  continu- 
ance of  this  policy  with  the  object  of  permanently  reducing 
the  bank's  capital  by  three  or  four  millions.  This  was  one 
of  the  questions  on  which  a  difference  of  opinion  prevailed, 
and  a  party  among  the  stockholders  wished  to  sell  the  stock 
in  order  to  increase  the  active  capital  of  the  bank,  which 
they  considered  too  reduced,  because  over  $11,000,000  were 
tied  up  in  suspended  debts  and  real  estate.  In  1824  Biddle 
was  urged  by  some  of  the  officials  of  the  bank  to  part  with 
this  stock,  but  declined,  since  he  agreed  with  Cheves  that 
the  bank  had  no  use  for  the  capital  at  that  time,  because 

i  Biddle  to  I.  Lawrence,  Nov.  22, 1825,  H.  R.  460,  22d  Cong.,  1st  Sess.,  pp.  436,  437. 

2 1.  Lawrence  to  Biddle,  Nov.  23, 1825,  ibid.,  p.  437. 

3  "  It  is  our  desire  to  do  everything  which  we  possibly  can  to  give  relief  to  both 

[i.e.,  the  banks  and  the  community  in  New  York] there  is  not  so  much  a  want  of 

money,  as  of  confidence."— Biddle  to  R.  Lenox,  Dec.  7, 1825,  P.  L.  B,,  Vol.  II,  pp.  76, 77. 

*  "  I  then  thought,  and  still  think,  that  this  measure,  the  increase  of  the  loans 
of  the  bank,  in  the  face  of  an  approaching  panic,  could  alone  have  averted  the  same 
consequences,  which,  in  a  few  days  afterwards,  were  operating  with  such  fatal  effect 
upon  England."— Biddle  to  Investigating  Committee  of  1832,  H.  R.  460,  22d  Cong., 
1st  Sess.,  p.  435;  also  Biddle  to  A.  Dickins,  Nov.  30, 1828,  P.  L.  B.,  Vol.  II,  p.  443. 

5  In  March  active  loans  were  $31,668,000;  May,  $33,992,000;  July,  $33,531,000;  Sep- 
tember, $33,091,000;  October,  $33,400,000;  December,  $32,329.000;  holdings  of  United 
States  funded  stock  increased  from  $18,400,000  in  March  to  $20,738,000  in  July  and 
were  at  $18,600,000  in  December;  circulation  increased  from  $6,977,000  in  March  to 
$9,542,000  in  October;  and  specie  fell  from  $5,782,000  to  $4,544,000. 


NICHOLAS  BIDDLE  AND  His  POLICY          109 

the  stock  was  not  sufficiently  appreciated,  and  because  the 
bank  wanted  to  take  a  government  loan  and  would  need  the 
funds  from  the  sale  of  the  forfeited  stock  to  pay  for  it.1  The 
transaction  then  would  be  doubly  profitable,  since  one  profit 
could  be  secured  on  the  sale  of  the  stock  and  another  on 
the  purchase  of  government  bonds  ;  it  would,  moreover, 
obviate  the  danger  of  having  too  large  a  capital,  since  the 
government  stock  would  replace  the  bank  stock  sold  and 
the  necessity  of  extending  discounts  would  not  arise.  In 
1824-25  the  bank  secured  $10,000,000  in  government  stock 
and  began  the  sale  of  its  own  forfeited  shares.  Most  of  the 
sales  took  place  in  the  first  six  months  of  1825,  when  the 
market  was  very  favorable,  the  stock  selling  at  119.  The 
profits  from  the  sales  up  to  July,  1825,  aggregated  $481,000. 2 
In  1827  business  was  slack  once  more,  and  again  Biddle 
attempted  to  secure  a  government  loan.3  This  time  he  was 
not  successful,  and  as  a  consequence  the  board  permitted 
loans  on  six-months'  paper.  This  was  a  mistake  and  was 
inconsistent  with  Biddle's  past  policy.  There  was  constant 
pressure,  however,  for  an  increase  in  the  dividends,  many 
of  the  stockholders  being  much  dissatisfied  with  their 
smallness  and  criticising  harshly  the  conservative  policy  of 
the  bank's  management.*  Whether  or  not  these  considera- 
tions influenced  the  president  cannot  be  said,  but  it  can  be 
stated  with  certainty  that  he  would  have  done  better  had  he 

1  Biddle  to  John  White,  of  Baltimore,  Feb.  27, 1824,  P.  L.  B.,  Vol.  II,  pp.  129, 130. 

2  Biddle  to  James  Lloyd,  July  5,  1825,  ibid.,  p.  28.     From  June  14,  1824,  to 
Dec.  5, 1829,  the  proceeds  of  stock  sold  were  $4,645,859.16,  the  average  rate  per  share 
was  $117,548,  and  the  profits  were  $693,559.16.— H.  R.  460,  21st  Cong.,  1st  Sess.,  pp. 
252-5,  294. 

3  Biddle  to  N.  Silsbee,  Feb.  19, 1827,  P.  L.  B.,  Vol.  II,  pp.  241-3 ;  to  Webster,  Feb. 
23,  ibid.,  pp.  244-6. 

*  In  1825  a  combination  was  formed  to  remove  Biddle  and  get  a  new  board  which 
would  pay  larger  dividends.  It  amounted  to  nothing,  but  Biddle's  informant,  a 
trusted  friend,  gave  it  as  his  opinion  that  the  dividends  should  be  increased.— Bowne 
to  Biddle,  New  York,  June  28, 1825,  B.  P.  In  1828  a  stockholder  at  Baltimore  wrote : 
"  You  are  doubtless  aware  of  the  opposition  to  your  administration  of  the  affairs  of 
the  Bank  over  which  you  preside,  which  has  recently  manifested  itself  in  your  city, 


110  THE  SECOND  BANK  OP  THE  UNITED  STATES 

persisted  in  the  policy  of  declining  all  long  loans,  as  he  had 
done  in  1824.  The  year  1828  was  again  one  of  pressure, 
and  this  time  the  corporation  was  not  so  well  prepared  to 
meet  the  situation  as  it  had  been  in  1825.  On  the  contrary, 
the  board  had  to  refuse  accommodations,  and  Biddle  gave 
reasons  for  its  refusal  which  were  not  particularly  laudable 
in  the  man  who  prided  himself  upon  relieving  the  stringency 
in  1825  by  the  enlightened  method  of  granting  loans  freely 
to  all  who  could  furnish  good  securities.  His  principal 
reason  was  that  the  banks  had  loaned  too  much,1  and  there 
can  be  no  doubt  that  the  Bank  of  the  United  States  must  be 
included  among  the  delinquents.  To  save  itself,  therefore, 
it  had  to  restrict  its  dealings  at  the  very  moment  it  should 
have  expanded  them,  and  inaugurated  a  contraction  lasting 
from  the  12th  of  February 2  until  the  1st  of  May.3 

The  success  of  Biddle's  management  from  1823  to  1828 
is  revealed  in  the  monthly  returns  of  the  bank.  On  the  first 
of  January,  1823,  the  total  investments  were  $41,754,000, 
and  on  the  same  date  in  1828,  $51,307,000,  an  increase  of 
over  $9,500,000.  Of  the  total,  United  States  funded  debt 
comprised  $11,000,000  at  the  first  date,  $17,624,000  at  the 
last,  so  that  the  increase  in  discounts  was  less  than  $3,000,- 
000 — not  at  all  excessive  when  the  contemporaneous  growth 
in  population  and  trade  is  considered.  Circulation  increased 
in  a  larger  ratio,  the  amount  more  than  doubling :  on  January 
1,  1823,  it  was  only  $4,432,000,  and  on  January  1,  1828, 

New  York  and  elsewhere.  The  stockholders  are  under  the  impression  that  your 
object  is  to  keep  in  check  the  State  Banks,  and  to  regulate  the  currency  of  the  coun- 
try at  their  cost.— This  they  say  may  not  be  inconvenient  to  you,  while  you  receive  the 
salary  of  President  of  the  Bank,  but  it  does  not  suit  them."  He  then  advises  Biddle 
to  declare  a  dividend  of  314  per  cent.—  June  17, 1828,  B.  P. 

1  Article  by  Biddle  in  National  Gazette,  of  Philadelphia,  April  10, 1828.    See,  for 
extracts,  GOUGE  (Cobbett's  edition),  pp.  150-56. 

2  Biddle  to  Lenox,  Feb.  12, 1828,  P.  L.  B.,  VoL  II,  p.  344. 

3  Same  to  same,  April  27, 1828,  ibid,  p.  381.  The  monthly  reports  show  no  contrac- 
tion.   The  explanation  is  that  the  demand  for  loans  was  so  excessive  that  to  get 
relief  an  expansion  would  have  been  necessary. 


NICHOLAS  BIDDLE  AND  His  POLICY          111 

$9,855,677.  The  deposits  of  individuals  rose  from  $3,372,- 
000  to  $6,142,000;  while  the  holdings  of  specie  mounted 
from  $4,424,000  to  $6,170,000.  By  July,  1828,  the  annual 
income  of  the  bank  had  been  increased  $823,312  over  its 
income  in  1822,  an  amount  representing  profits  on  $21,000,- 
000,  which  had  been  secured,  first,  by  the  sale  of  the  bank's 
stock  and  the  investment  of  the  funds  in  a  more  productive 
form,  and,  secondly,  by  the  enlargement  of  the  bank's  circu- 
lation and  consequent  dealings  in  exchange.  The  suspended 
debt  had  been  reduced  from  over  $9,000,000  to  $7,109,009. 
The  surplus  had  grown  from  nothing  to  $1,500,000;  the 
semi-annual  dividends  from  2^  to  3^  per  cent. ;  the  western 
offices  had  been  so  carefully  managed  that  the  arrears  of 
interest  paid  annually  $111,000.  It  was  with  justice  that 
the  stockholders  in  1828  looked  upon  the  result  as  a  "signal 
triumph."1 

The  most  notable  increase  in  the  transactions  of  the  bank 
during  this  period  are  to  be  found  in  the  dealings  in 
exchange.  Foreign  exchange  was  of  little  consequence 
until  1826,  when  it  began  to  develop.  The  profits  from 
foreign  exchange  in  the  first  six  months  of  that  year  were 
$60,000,2  and  this  was  about  the  average  rate  of  profits 
thenceforth,8  the  trade  taking  its  final  form  in  1827-28.* 
The  extensive  dealings  in  foreign  exchange  were  based  upon 
the  sale  of  southern  produce,  particularly  cotton.  As  a  con- 
sequence of  the  cotton  trade  the  bank  was  a  large  buyer  of 
foreign  bills  in  the  South  and  a  large  seller  of  them  in  the 
North.5  This  kept  the  exchange  with  England  fairly  level, 
and  Biddle  claimed  that  the  dealings  were  "less  important 

1  Report  of  the  Committee  of  Stockholders,  Sept.  1, 1828,  NILES,  Vol.  XXXV,  pp. 
74,  75. 

2  Biddle  to  P.  P.  F.  Degrand,  of  Boston,  June  22, 1826,  P.  L.  B.,  Vol.  II,  p.  172. 
8  Biddle  to  Gallatin,  July  29, 1830,  ibid.,  Vol.  HI,  p.  308. 

'Same  to  same,  NOT.  15, 1830,  ibid.,  p.  393. 
s  Same  to  same,  July  29, 1830,  ibid.,  p.  308. 


112  THE  SECOND  BANK  OF  THE  UNITED  STATES 

by  far  as  a  source  of  profit,  than  as  a  great  engine  for  pro- 
tecting the  currency  from  ruinous  fluctuations."1  Undoubt- 
edly there  was  much  of  truth  in  this  claim,  but,  truth  or  not, 
it  is  certain  that  from  the  year  1827  the  Bank  of  the  United 
States  virtually  controlled  the  foreign  exchange  market, 
being  able  by  the  plan  of  buying  bills  in  the  South  and  sell- 
ing bills  in  the  North — in  other  words,  through  its  branch- 
bank  system  —  to  drive  out  all  competition.  This  was  the 
source  of  much  dissatisfaction  among  bankers  and  brokers 
who  had  hitherto  drawn  a  considerable  portion  of  their  prof- 
its from  dealings  in  foreign  exchange.2  One  of  the  most 
efficient  causes  of  the  bank's  unpopularity  with  the  local 
banks  in  the  large  business  centers  arose  from  this  condi- 
tion of  affairs,  and  frequent  charges  were  made  that  the 
bank  manipulated  the  market  for  the  purpose  of  increasing 
its  profits  and  driving  out  its  competitors.  These  assertions 
do  not  appear  to  rest  on  any  basis,  and  may  be  disregarded. 
The  bank's  dealings  in  foreign  exchange  were  much  expanded 
by  the  selling  of  bills  for  the  China  trade,  and  were  effective 
in  stopping  the  export  of  specie  to  the  East  Indies  and  to 
China.3 

The  dealings  in  inland  exchange  also  increased  very  con- 
siderably. In  January,  1823,  they  were  only  $1,940,000, 
while  in  January,  1828,  they  were  $5,022,000.  Here  is 
revealed  at  once  Biddle's  method  of  augmenting  the  bank's 
discount  business,  for  three-quarters  of  this  augmentation  is 
plainly  apparent  in  these  figures.  The  increase  took  place 
mostly  in  the  West  and  South.  The  total  discounts  of  bills 
of  inland  exchange  from  July,  1827,  to  July,  1828,  were 
$22,084,222,  and  the  profits  $451,203.17,  as  against  profits 
in  1822  of  $95,240.25.* 

The  period  1823-28  was  one  both  of  conservative  and  of 

i  Biddle  to  Gallatin,  July  29, 1830,  P.  L.  P.,  Vol.  HI,  p.  308.  2  ibid. 

3  Biddle  to  T.  Pitkin,  Feb.  4, 1835,  B.  P.    The  sale  of  India  bills  began  in  1825. 
*  Keport  of  the  Committee  of  Stockholders,  Sept.  1, 1828,  NILES,  Vol.  XXXV,  p.  74. 


NICHOLAS  BIDDLE  AND  His  POLICY          113 

successful  banking  on  the  part  of  the  Bank  of  the  United 
States;  the  affairs  of  the  institution  were  carefully  man- 
aged ;  it  extended  its  dealings  considerably ;  it  checked  the 
tendencies  of  the  state  banks  to  do  unsound  business;  it  put 
an  end  to  most  of  the  depreciated  state -bank  currencies;  it 
was  fairly  popular;  its  dealings  with  the  government  were 
on  the  best  footing;  it  gave  the  nation  a  better  currency 
than  the  country  ever  before  had ;  and  it  had  finally  reached 
the  point  in  public  opinion  where  it  was  considered  neces- 
sary for  the  uses  both  of  the  government  and  of  the  people. 


CHAPTER  VI. 
THE  BRANCH  DRAFTS. 

THE  means  employed  by  Biddle  to  suppress  the  depreci- 
ated currencies  of  the  South  and  West,  making  the  currency 
of  the  United  States  fairly  sound  and  uniform,  and  thus 
giving  the  Bank  of  the  United  States  a  preponderating  share 
in  the  business  of  those  sections,  have  been  detailed.  Com- 
plete success,  however,  did  not  attend  these  measures  until 
the  introduction  of  "  branch  drafts,"  as  they  were  called. 
These  did  not  in  any  single  respect  affect  the  measures 
already  adopted,  but  simply  supplied  the  means  of  executing 
them.1 

It  will  be  remembered  that  Biddle  had  never  believed 
that  the  charter  provision  for  receiving  the  branch  notes 
everywhere  in  payment  to  the  government  was  a  defect,  nor 
indeed  that  such  a  usage  would  be  perilous  if  extended  in  a 
large  measure  to  individuals.  He  was  thoroughly  persuaded 
that  the  bank  could  deal  extensively  in  the  West  and  South, 
provided  only  that  some  safe  means  were  discovered  by 
which  the  offices  in  those  sections  could  be  prevented  from 
attracting  to  themselves  an  undue  share  of  the  bank's  capi- 
tal ;  in  other  words,  provided  that  some  method  was  found 
whereby  the  branches  furnished  the  funds  when  they  issued 
their  notes  for  the  payment  of  their  notes.  He  very  early 
concluded  that  he  had  found  the  solution  of  the  problem  in 

i  Biddle  was  always  proud  of  his  "  system,"  in  which  the  drafts  were  the  crown- 
ing measure.  "Among  the  documents  furnished  Mr.  Tyler  was  one  showing  the 
change  in  the  policy  of  the  Bank  made  by  myself  which  led  to  the  full  development 
of  its  powers  and  its  usefulness.  It  is  a  very  curious  and  a  very  authentic  document 
and  interests  me  specially  because  really  the  change  of  the  system  made  the  Bank 
what  it  has  been  for  the  ten  years  past,  and  is  my  peculiar  work.  I  should  like  that 
matter  explained  to  the  country  by  your  Committee,  so  as  to  become  historical  and 
I  will  thank  you  therefore  to  take  charge  of  it."—  Biddle  to  Webster,  Dec.  8, 1834, 
P.  L.  B.,  Vol.  V,  p.  284. 

114 


THE  BRANCH  DRAFTS  115 

the  purchase  of  bills  of  domestic  exchange  which  should  be 
payable  in  those  centers  to  which  the  notes  naturally  gravi- 
tated.1 The  bills  bought  were  to  be  drawn  on  New  Orleans 
or  the  Atlantic  cities  at  short  dates,  so  that  they  might 
come  to  maturity  and  be  paid  at  these  places  simultaneously 
with  the  notes.2  The  plan  was  an  excellent  one,  and  could 
produce  no  embarrassments,  provided  the  bills  of  exchange 
were  promptly  paid. 

Even  before  the  system  was  elaborated,  however,  it  was 
painfully  evident  that  the  bank  did  not  possess  the  means  of 
executing  it.  By  the  terms  of  the  charter  all  its  notes  had 
to  be  signed  by  its  president  and  countersigned  by  its 
cashier,  and  these  officers  could  not  possibly  sign  a  suffi- 
cient amount  of  small  notes  to  supply  the  branches  with 
the  necessary  currency.  Consequently  Biddle's  plans  could 
not  succeed  in  the  first  years  of  his  administration.  By 
1828  the  South  and  West  were  almost  destitute  of  notes 
of  the  bank.  The  whole  amount  of  five-dollar  notes  issued 
up  to  that  year  equaled  only  $1,576,000.  Several  offices 
were  almost  entirely  without  notes  of  the  smaller  denomi- 
nations: "Portsmouth  had  on  hand  only  2  notes  of  $5; 

1  "The  question  which  has  always  been,  and  still  is  one  of  the  greatest  difficul- 
ties in  the  administration  of  the  bank  is  this  of  its  circulation."   The  difficulty  arose 
from  the  necessity  of  redeeming  all  the  bank's  notes  at  every  office,  no  matter  where 
issued,  in  dealings  with  the  government,  this  giving  rise  to  fears  of  embarrassment 
to  the  institution.    "  It  was  afterwards  considered  worthy  of  trial,  whether  the  diffi- 
culty might  not  be  surmounted  by  a  large  participation  in  domestic  exchanges; 
which,  besides  its  other  advantages,  might  enable  the  bank  to  be  always  provided 
with  a  fund,  which,  being  in  fact  created  out  of  these  issues,  would  accompany  and 
sustain  them."— BIDDLE,  H.  R.  460,  22d  Cong.,  1st  Sess.,  p.  321.    See  also  Triennial 
Report  for  1831,  NILES,  Vol.  XLI,  pp.  113  ff. 

2  "  When  the  branch  at  New  Orleans  issues  its  notes,  it  does  it  to  various  per- 
sons, and  for  different  objects If  these  notes,  however,  are  issued  in  payments 

for  bills  on  the  north,  these  bills  are  sent  to  the  northern  branches,  and,  being  there 
paid,  await  the  arrival  of  the  period  when  the  notes,  having  performed  the  functions 
of  a  circulating  medium,  are  brought  in  the  course  of  trade  to  the  Atlantic  offices, 
where  they  are  met  by  the  proceeds  of  the  bills  for  which  they  were  given ;  or,  finally, 
if  these  notes  are  issued  in  New  Orleans  in  the  purchase  of  exchange,  based  on  the 
exportation  of  produce  to  Europe,  the  bills  of  exchange  drawn  by  the  bank  upon  the 
European  houses  to  which  the  bills  from  New  Orleans  are  remitted,  provide  the  fund 
to  meet  the  notes  of  the  branch  at  New  Orleans,  originally  issued  in  the  purchase  of 
them."— H.  jR.  460,  22d  Cong.,  1st  Sess.,  p.  321. 


116   THE  SECOND  BANK  OF  THE  UNITED  STATES 

Providence  only  8;"  and  Louisville  was  "without  a  single 
five  dollar  note."  All  the  offices  together  had  only  $100,- 
000  in  five-dollar  notes,  and  $500,000  in  ten-dollar  notes.1 

As  this  difficulty  had  existed  from  the  first,  there  had 
been  frequent  attempts  to  escape  it  by  petitioning  Congress 
for  permission  to  have  signers  of  the  notes  other  than  the 
president  and  cashier.  The  bank  first  applied  in  January, 
18 18.2  The  Senate  passed  a  bill  authorizing  the  appoint- 
ment of  a  vice-president  and  deputy  cashier  for  the  purpose,3 
but  the  bill  was  indefinitely  postponed  in  the  House  at  the 
third  reading.  After  Cheves  became  president  a  second 
memorial  was  presented.4  Again  a  bill  was  prepared  in  the 
Senate,  empowering  the  appointment  of  an  agent  and  a 
registrar  to  sign  the  notes,5  and  passed  there  in  February, 
1821  ;6  and  again  it  failed  in  the  House  after  being  twice 
read.7  A  third  memorial  was  presented  in  December,  1821,8 
and  a  bill  was  offered  in  the  Senate,  failing  there  by  a  vote 
of  23  to  19.9  A  fourth  memorial,  in  1823,10  was  never  acted 
upon  by  the  Senate,  but  a  House  committee  reported  favor- 
ably.11 Nothing,  however,  was  done. 

The  difficulty  of  signing  sufficient  notes  became  greater 
and  greater  as  time  passed,  since  many  of  them  became 
worn  out  and  had  to  be  destroyed.  From  February  2,  1826, 
to  January  21,  1827,  over  $2,800,000  were  thus  retired  from 
circulation.12  Cashier  Mcllvaine  declared  that  the  labor  of 
signing  notes  was  intolerable,  that  sufficient  could  not  be 

1  Biddle  to  Secretary  Rush,  Jan.  10, 1828,  H.  R.  460,  22d  Cong.,  1st  Sess.,  pp.  53, 54. 

2  Ibid.,  p.  49.    Memorial  presented  Jan.  13, 1818,  A.  of  C.,  15th  Cong.,  1st  Sess.,  Vol. 
I,  p.  710;  reported  favorably  Jan.  20,  ibid,,  p.  792. 

3  April  14, 1818,  ibid.,  p.  365. 

*Dec.  1, 1820,  ibid.,  16th  Cong.,  2d  Sess.,  Vol.  in,  p.  29. 

5  Dec.  20,  ibid.,  p.  127.  « Ibid.,  p.  360.  ^  Ibid.,  p.  1193. 

8  Dec.  27,  ibid.,  17th  Cong.,  1st  Sess.,  Vol.  I,  p.  40. 

9  March  14, 1822,  ibid.,  p.  291. 

10  Presented  Jan.  27, 1823,  ibid.,  2d  Sess.,  Vol.  Ill,  p.  156 ;  in  the  House,  Jan.  28, 
ibid.,  p.  713. 

11  Feb.  27,  ibid.,  pp.  1134  ff.  12  Mcllvaine  to  Biddle,  Jan.  22, 1827,  B.  P. 


THE  BRANCH  DRAFTS  117 

supplied  in  any  case,  and  that  he  would  resign  rather  than 
continue  in  office  under  such  harsh  conditions.  "The  de- 
struction is  now  so  rapid,"  he  wrote,  "  that  our  circulation 
and  specie  must  soon  balance  each  other  and  leave  us  with- 
out profit  from  a  quarter  where  we  ought  to  have  the  most.'" 
The  directors,  therefore,  returned  to  the  project  of  securing 
congressional  consent  to  the  appointment  of  additional 
signers.  Biddle,  writing  to  Webster  in  1826,  gave  it  as  his 
opinion  that  the  charter  as  it  stood  would  permit  other 
signers,  but  added  that  he  "would  like  to  have  an  act,"  and 
suggested  the  revival  of  the  memorial  of  1823.2  Acting 
under  authority  from  the  board,  he  again  appealed  to  Con- 
gress,3 but  without  avail,  McLane  declaring  that  the  House 
Committee  of  Ways  and  Means  would  not  make  a  favorable 
report.* 

Satisfied  now  that  Congress  would  never  give  permission, 
the  board  of  directors  cast  about  for  some  expedient  by 
which  they  could  obtain  the  desired  end.  The  invention  of 
branch  drafts  was  the  result.  The  possibility  of  issuing 
such  a  currency  was  first  pointed  out  by  John  Forsyth  in 
1818,5  and  it  is  probable  that  Biddle  took  the  idea  from 
Forsyth's  suggestion.6  Before  proceeding  to  issue  the  drafts 
the  board  thought  it  advisable  to  consult  competent  legal  tal- 
ent, and  Biddle  laid  the  proposition  before  Daniel  Webster  and 
Horace  Binney,7  both  of  whom  were  at  the  time  members  of 

1  To  Biddle,  Jan.  24, 1827,  B.  P.       3  Dec.  1, 1826,  H.  E.  460, 22d  Cong.,  1st  Sess.,  p.  52. 

2  Feb.  16, 1826,  ibid.  *To  Biddle,  Jan.  19, 1829,  B.  P. 

5  "  The  bank  is  authorized  to  trade  in  bills  of  exchange,  and  trades  in  bills  with 
each  of  its  branches.    The  directors  thus  have  nothing  to  do  but  make  an  order 
directing  the  president  and  cashier  of  each  branch  to  draw  on  them  small  bills,  pay- 
able to  the  bearer,  and  the  object  is  effected. "—A.  ofC.,  15th  Cong.,  1st  Sess.,  Vol.  II, 
p.  1748,  April  16,  1818. 

6  Biddle  mentions  Forsyth's  remarks  to  Edward  Everett,  March  10, 1832,  P.  L.  B., 
Vol.  IV,  p.  213. 

i "  The  several  offices  of  this  bank,  especially  those  at  a  distance,  are  in  the 
habit  of  drawing  checks  on  the  bank  for  the  accommodation  of  the  community  in  its 
exchange  operations.  These  checks,  from  the  nature  of  the  business  they  are 
designed  to  facilitate,  as  well  as  from  the  labor  of  multiplying  them,  and  the  hazard 


118  THE  SECOND  BANK  OF  THE  UNITED  STATES 

the  central  board  and  thoroughly  familiar  with  the  subject. 
Binney  gave  an  opinion  supporting  the  bank's  power  under 
the  charter  to  issue  the  drafts,  and  Webster  and  Attorney- 
General  Wirt  concurred.  The  opinion  was  to  the  effect  that, 
since  the  issue  of  checks  upon  the  bank  by  its  branches  was 
an  ordinary  banking  operation,  the  proposed  use  was  legal, 
whether  the  checks  were  "  for  large  sums  or  small,"  "  signed 
by  one  officer  or  more,"  with  or  without  "the  external 
appearance  of  a  bank  note." l  Hereupon  the  bank  authorized 

of  their  being  counterfeited,  have  generally  been  for  large  sums.  It  is  proposed, 
with  a  view  to  the  more  general  accommodation  of  the  community  and  the  bank, 
that  the  offices  should  be  instructed  to  issue  these  checks  for  smaller  sums,  such  as 
twenty,  ten,  and  five  dollars,  whenever  requested  by  the  dealers  with  those  offices ; 
and,  in  order  to  relieve  the  offices  from  the  burden  of  preparing  them,  to  transmit, 
from  the  bank,  the  blank  forms  of  the  checks,  wanting  only  the  signatures  of  the 
proper  persons  at  the  respective  offices.  With  a  view  to  the  prevention  of  counter- 
feits, and  the  security  of  the  bank  as  well  as  the  public,  it  is  further  proposed,  that 
the  general  appearance  of  these  checks  should  be  uniform,  and  approaching,  as  near 
as  their  different  natures  will  permit,  to  that  of  the  notes  of  this  bank,  to  which  the 
community  is  now  habituated ;  and,  also,  that  they  should  be  signed,  not  by  the 
cashiers  alone,  as  the  checks  are  at  present,  but  by  both  the  presidents  and  cashiers 
of  the  respective  offices."— Biddle  to  Webster  and  Binney,  March  22, 1827,  H.  R.  460, 
22d  Cong.,  1st  Sess.,  p.  50. 

i  The  essential  points  made  were  as  follows :  "  As  there  is  no  substantial  differ- 
ence between  the  checks  or  drafts  heretofore  drawn  at  the  different  offices  upon  the 
Bank  of  the  United  States,  and  those  which  it  is  proposed  hereafter  to  draw,  the 
difference  being  in  appearance  more  even  than  in  form,  there  can  be  no  legal  objec- 
tion to  them,  which  does  not  apply  to  everything  of  this  nature  that  has  been  done 
by  the  present  Bank  of  the  United  States,  by  the  former  bank,  and  by  almost  all  the 
banks  in  the  country :  .  .  .  . 

"  If  the  former  practice  has  been  lawful,  so  must  the  proposed  practice  be ;  for, 
whether  the  drafts  be  for  large  sums  or  small,  whether  they  are  signed  by  one  officer 
or  more,  and  whether  they  have  the  external  appearance  of  a  bank  note  or  other- 
wise, must  be  a  matter  of  perfect  indifference,  and  entirely  within  the  competency 
of  the  bank  to  regulate  at  its  pleasure. 

"  That  the  former  practice  is  without  objection,  is  to  be  inferred  from  its  long 
continuance.  It  is  a  practice,  moreover,  within  the  powers  of  every  banking  corpora- 
tion, for,  in  this  way  only,  can  the  intercourse  of  a  bank  and  its  offices,  and  the 
exchange  operations  between  banking  institutions,  be  adequately  prosecuted,  and 
consequently,  unless  restrained  by  charter,  every  bank  is  competent  to  empower  its 
officers  to  draw  such  drafts  or  checks  upon  its  funds,  wherever  situated,  and  to  bind 
the  corporation  to  the  holder  for  their  due  honor.  It  is  an  ordinary  banking  opera- 
tion, to  which  their  general  faculties  are  perfectly  competent Whether  it  is 

within  the  power  of  the  corporation  to  issue  '  bills  or  notes  promising  the  payment  of 
money  to  any  person  or  persons,  his  or  their  order,  or  to  bearer,'  unless  signed  by 
the  president,  and  countersigned  by  the  principal  cashier  or  treasurer,  is  not  the 
present  inquiry.  The  affirmative  provision  in  the  12th  fundamental  article,  which 
gives  such  bills  or  notes,  though  unsealed,  a  particular  effect,  has  no  reference,  I 
conceive,  to  checks  or  drafts  drawn  at  the  offices  upon  the  bank."— Philadelphia, 
March  23, 1827,  H.  R.  460,  22d  Cong.,  1st  Sess.,  p.  51. 


THE  BRANCH  DRAFTS  119 

the  issue  by  the  offices  of  five-  and  ten-dollar  drafts,1  signed 
by  the  branch  presidents  and  cashiers,  drawn  on  the  prin- 
cipal cashier  at  Philadelphia,  and  payable  to  some  officer  of 
the  branch,  or  his  order.  This  officer  then  indorsed  the  drafts 
"payable  to  bearer,"  with  the  effect  of  transforming  them 
into  a  circulating  medium.2  The  drafts  were  prepared  in 
blank  at  Philadelphia  and  transmitted  to  the  offices.  They 
were  made  to  resemble  bank  notes  as  closely  as  possible  in 
design,  color,  and  texture,3  and  so  accurate  was  the  likeness 
that  after  they  had  been  extensively  circulated  for  over  five 
years  "not  one  man  in  ten  thousand"  had  "  ever  noticed  the 
difference."  *  They  were  issued  first  in  June,  1827,  in  five- 
and  ten-dollar  denominations,  twenty-dollar  drafts  being 
added  in  183 1.5  The  secretary  of  the  treasury  accepted  them 
in  payment  of  taxes  and  dues  on  precisely  the  same  footing 
as  the  notes  of  the  bank,6  thus  giving  the  approval  of  the 
government  to  their  use  and  materially  assisting  in  their  cir- 
culation. They  were  bitterly  attacked  in  1832,  and  when 
Congress  renewed  the  charter  it  inserted  a  clause  forbidding 
their  use  after  1836,  additional  signers  of  the  circulating 
notes  being  permitted  instead.7  The  bank  employed  them 
to  the  end,  while  the  government  continued  their  receipt 
until  January  1,  1835.8 

1  Minutes  of  the  Bank,  April  6, 1827,  ibid.,  p.  52. 

2  Ibid.,  p.  56.    The  form  was  as  follows : 

Cashier  of  the  Bank  of  the  United  States, 
Pay  to  Jas.  L.  Smith^  or  order,  five  dollars. 

Oihce  of  discount  and  deposit  in  Utica, 
The  3d  day  of  September,  1831. 

JOHN  B.  LEVING,  President. 
N.  V.  GRAZIER,  cashier. 

This  was  then  indorsed :  "  Pay  to  the  bearer.  JAS.  L.  SMITH."— C.  D.,  Vol.  VIII, 
Part  I,  p.  120.  The  name  of  the  president  at  Utica  was  Devereux,  not  Leving. 

SBiddle  to  Secretary  Rush,  Jan.  10, 1828,  H.  R.  460,  22d  Cong.,  1st  Sess.,  p.  54. 

«  CLAYTON,  C.  D.,  Vol.  VIII,  Part  II,  p.fl.975,  March  2, 1832. 

5ff.  R.  460,  22d  Cong.,  1st  Sess.,  pp.  56,  57. 

«  Secretary  Rush  to  Biddle,  Jan.  21, 1828,  ibid.,  p.  55. 

7  See  amendments  to  charter,  sec.  2,  proviso,  Sen.  Jour.,  22d  Cong.,  1st  Sess., 
p.  451.    See  Appendix  IV  for  the  amended  bill. 

8  Woodbury's  circular  of  Nov.  5, 1834,  forbidding  their  receipt  after  Jan.  1, 1835, 
Ex.  Doc.  42,  23d  Cong.,  2d  Sess.,  pp.  2, 3. 


120  THE  SECOND  BANK  OF  THE  UNITED  STATES 

Benton,  who  attacked  the  drafts  as  illegal,  succeeded  in 
casting  doubt  upon  them,  and  it  consequently  becomes  of 
importance  to  determine  their  legal  status.  Of  course,  a 
layman's  opinion  on  the  legal  character  of  bank  paper  is  of 
relatively  little  value,  but,  by  sticking  to  facts  which  are  pretty 
generally  admitted,  one  may  hope  not  to  go  far  astray. 

The  first  point  to  be  noted  is  that  the  drafts,  while  in 
actual  use  notes  of  the  bank,  were  in  form  and  law  drafts  or 
checks.  In  determining  their  legal  status  it  is  certainly  of 
the  first  importance  to  keep  clearly  this  distinction  between 
the  use  and  the  legal  nature  of  the  drafts.  Had  Benton 
chosen  to  do  so,  his  speech  would  have  been  briefer,  less 
involved,  and  less  incomprehensible.  But  he  preferred  to 
apply  two  incompatible  tests  to  the  drafts:  to  treat  them  as 
if  they  were  to  be  judged  in  law  both  as  bills  of  exchange 
and  as  bank  notes.  Clearly,  to  spend  time  and  labor  piling 
up  proof  that  they  were  not  notes  was  fatuous,  since  no  one 
ever  claimed  that  they  were;  to  argue  that,  as  they  were  not 
notes  of  the  bank,  they  were  therefore  illegal  as  a  currency, 
was  disingenuous,  the  conclusion  by  no  means  following 
from  the  premises.  What  was  necessary  was  to  prove  that 
the  drafts  as  checks  were  an  illegal  currency,  and  this 
Benton  certainly  did  not  succeed  in  doing. 

In  confirmation  of  this  conclusion  there  exists  the  opinion 
of  Binney,  Webster,  and  Wirt  already  quoted.  To  the  lay 
mind  this  seems  conclusive.  But  the  opinion  of  the  three 
great  lawyers  does  not  stand  alone;  it  is  supported  by  a 
decision  of  the  circuit  court  of  the  United  States,  which 
definitely  adjudged  that  the  bank  was  within  its  legal  powers 
when  issuing  the  drafts.  The  drafts,  according  to  this 
decision,  were  not  notes,  and  consequently  not  subject  to  the 
charter  stipulations  in  respect  to  notes.  The  charter  did 
not  on  that  account  prohibit  their  issue ;'  in  fact,  it  author- 

1 "  We  find  in  it  [i.  e.,  the  charter]  no  prohibition  direct  or  indirect  against  issu- 
ing this  kind  of  paper  either  by  the  bank  or  any  of  its  branches,  or  any  word  or 


THE  BRANCH  DRAFTS  121 

ized  the  issue  of  such  paper  by  the  insertion  of  the  words 
"or  other  contract"  in  the  twelfth  fundamental  article  of  the 
eleventh  section;1  the  drafts  were  contracts  between  the  bank 
and  the  recipients  of  them,  for  whose  payment  the  bank  was 
liable  under  the  charter,  as  it  was  for  all  acts  done  under  its 
authority  by  its  agents  ;2  that  the  drafts  constituted  a  cur- 
rency made  no  difference  in  their  legal  status  whatever;8 
the  counterfeiting  of  them  was  a  crime,*  and  the  individual 
directors  were  liable  if  they  were  issued  in  excess  of  the 
charter  stipulation.5 

After  this  decision  it  seems  superfluous  to  combat  Ben- 
ton's  arguments,  but  their  consideration  will  assist  in  deter- 
mining the  precise  legal  character  of  the  paper  and  therefore 
may  not  be  labor  lost.  To  begin  with,  Benton  reached  his 
conclusions  only  by  denying  the  validity  of  the  court's 

•expression  by  which  congress  has  excluded  it  from  the  purview  of  the  18th  section ; 
neither  can  we  perceive  any  thing  in  its  nature  which  would  justify  such  infer- 
ence  The  bank  is  left  free  to  contract  debts  by  any  other  mode  than  by  their 

promissory  note  or  an  obligation  under  seal,  with  no  other  limitation  than  is  con- 
tained in  the  8th  fundamental  article,  which  is  merely  as  to  amount,  the  only  effect 
of  which,  is  not  to  exempt  the  bank  from  liability  for  the  excess,  but  to  make  the 
•directors,  under  whose  administration  it  shall  happen,  personally  liable." — United 
States  vs.  Benjamin  Shellmire,  October  term,  1831,  Judges  Baldwin  and  Hopkinson, 
1  Baldwin,  370  ff. ;  see  also  MILES,  Vol.  XLI,  p.  231. 

i "  This  is  an  explicit  declaration  that  the  bank  may  make,  and  are  bound  by 
•contracts  other  than  those  by  bond,  bill,  note  or  deposit.  These  other  contracts 

must  be  taken  to  mean  and  be  co-extensive  with  ordinary  transactions  of  banks 

In  all  these  operations,  checks  or  orders  on  the  bank  or  its  cashiers,  are  indispen 

sible  to  conducting  the  business  of  the  bank It  is  in  our  opinion  no  answer  to 

these  views,  that  the  law  has  not  expressly  authorized  the  officers  of  the  branches  to 
draw  on  the  bank ;  it  is  enough  for  this  point  that  they  are  not  prohibited  from 
•doing  so." — Ibid. 

2  "The  8th  fundamental  article  makes  the  bank  liable  for  all  debts,  though  they 
•exceed  the  amount  limited ;  —  the  14th  makes  the  offices  of  discount  and  deposite  its 
agents,—  ....  The  mode  in  which  the  bank  contracts  a  debt,  the  shape  it  assumes, 
or  the  places  where  contracted,  is  of  no  importance.    The  officers  being  its  agents, 
the  debts  contracted  by  them  become  the  debts  of  the  corporation,  imposing  a  duty 
to  pay  them."—  Ibid.,  and  MILES,  Vol.  XLI,  p.  232. 

3  "They  may  be  in  large  drafts  or  orders  for  remittance,  or  small  ones  for  cur- 
rency or  circulation,  and  in  any  form,  with  or  without  ornaments,  devices  or  marks. 
Whether  they  resemble  in  these  particulars  the  notes  of  bank,  is  immaterial ;  their 
substance  and  legal  effect  are  the  same ;  they  create  a  new  debt  or  duty,  obligatory 
on  the  bank."— Ibid. 

i  Ibid.  5  Ibid.,  and  MILES,  Vol.  XLI,  p.  231. 


122  THE  SECOND  BANE  OP  THE  UNITED  STATES 

decision,  a  method  which  in  itself  invalidates  most  of  his 
own  argument.  Having  refused  to  admit  the  correctness  of 
the  court's  interpretation  of  the  law,  he  insisted  on  treating 
the  charter  specifications  as  grants  of  power  instead  of  limi- 
tations upon  powers  already  possessed;1  asserted  that  the 
drafts  were  not  notes,  and  then  impeached  their  legality  as 
bills  of  exchange.  His  assertion  that  the  drafts  were  not 
notes  will  be  readily  admitted.  When  he  proceeds,  however, 
to  declare  that  as  bills  of  exchange  they  were  not  valid 
instruments,  he  seems  to  be  in  error,  for  to  reach  this  con- 
clusion he  argued  that  bills  of  exchange  must  always  be 
transferred  by  indorsement  and  not  by  delivery,  and  that 
such  bills  could  not  be  reissued;2  This  was  certainly  errone- 
ous as  to  transfer,  for  "notes  and  bills  are  often  made  pay- 
able to  bearer,  or  'A.  B.  or  bearer.'  Such  instruments  are 
prima  facie  the  property  of  the  holder,  are  transferable  by 
delivery,  and  if  transferred  by  indorsement  the  indorsement 
need  not  be  proved."5  Even  if  not  made  payable  to  bearer 
when  drawn,  if  indorsed  "payable  to  bearer,"  the  bill  would 
become  "transferable  thereafter  by  delivery." *  Nor  did  it 
make  any  difference  that  the  bank  was  both  drawer  and 
drawee,  maker  and  payee,  providing  that  the  bill  was 
indorsed.5  The  bank  was  bound  also  by  the  act  of  its  officers 
at  the  branches.  These  points  cover  the  branch  drafts  com- 
pletely, supposing  them  to  be  inland  bills  of  exchange.  As 

1  If  Benton  had  been  correct  in  this,  the  bank  could  not  have  dealt  in  promis- 
sory notes,  since  there  was  no  clear  grant  in  the  charter  to  do  this.    The  courts  of 
Kentucky  had  at  one  time  decided  against  the  bank's  power  on  this  ground. 

2  For  Benton's  argument  see  C.  D.,  Vol.  VIII,  Part  I,  pp.  114-40.    For  answer  see 
Buckner's  argument,  ibid.,  p.  553. 

3  American  and  English  Encyclopedia  of  Law,  Vol.  II,  p.  337. 

«  "  The  character  of  an  instrument  may  be  changed  by  indorsement,  e.  g.,  a  note 
payable  to  'order,'  if  indorsed  to  'bearer,'  becomes  transferable  thereafter  by 
delivery."— Ibid.,  pp.  338,  339. 

5  "That  the  payee  or  drawee  is  identical  with  the  maker  or  drawer,  does  not 
invalidate  a  note  or  bill." — Ibid.,  p.  336.  "But  such  notes  are  incomplete  until 
indorsed."  — 118  Mass.,  541;  85  111.,  513.  "The  same  person  may  be  drawer  and 
drawee,  or  drawer  and  payee." — American  and  English  Encyclopedia  of  Law,  Vol.  II, 
p.  315. 


THE  BRANCH  DRAFTS  123 

to  reissue,  it  would  seem  that,  in  case  all  parties  to  the  drafts 
agreed,  they  might  be  reissued. 

The  drafts,  however,  were  not  ordinary  bills  of  exchange, 
but  checks  on  the  bank,  differing  from  ordinary  bills  in 
always  being  drawn  on  a  deposit  of  money  in  a  bank;  in 
having  no  days  of  grace  allowed ;  in  not  freeing  the  drawer 
by  neglect  on  the  part  of  the  holder  to  present  them  for 
payment;  and  in  not  being  due  until  payment  was  demanded.1 
Of  course,  they  were  transferable  by  delivery  if  indorsed 
payable  to  bearer. 

It  must  be  admitted,  however,  that  the  use  of  branch 
drafts  as  a  currency  was  not  contemplated  when  the  charter 
was  granted.  This  would  not  necessarily  make  them  illegal. 
Many  other  banking  operations  have  not  been  contemplated 
when  banking  privileges  have  been  conferred,  but  have 
grown  up  without  any  specific  legal  authority  for  them. 
Such  was  the  case  with  the  practice  of  certifying  checks. 
Yet  the  courts  would  not  therefore  hold  that  certification 
was  an  illegality. 

The  drafts  varied  in  their  legal  status  from  the  notes  of 
the  bank  in  the  following  particulars:  they  were  not  signed 
by  the  president  and  cashier  of  the  parent  bank;  nor 
drawn  in  the  name  of  the  corporation;  nor  subject  to  the 
supervision  of  the  secretary  of  the  treasury;  nor  legally 
receivable  in  payment  of  public  dues;  nor  payable  where 
issued ;  nor  suable  on  at  the  issuing  branch ;  nor  limited  to 
the  denomination  of  five  dollars  or  above.  Of  all  these  dif- 

i "  Bank  checks  are  not  inland  bills  of  exchange,  but  have  many  of  the  properties 
of  such  commercial  paper ;  and  many  of  the  rules  of  the  law  merchant  are  applicable 

to  both The  chief  points  of  difference  are  that  a  check  is  always  drawn  on 

a  bank  or  banker.  No  days  of  grace  are  allowed.  The  drawer  is  not  discharged 
by  the  laches  of  the  holder  in  presentment  for  payment,  unless  he  can  show  that  he 
has  sustained  some  injury  by  the  default.  It  is  not  due  until  payment  is  demanded, 
and  the  statute  of  limitations  runs  only  from  that  time.  It  is  by  its  face  the  appro- 
priation of  so  much  money  of  the  drawer  in  the  hands  of  the  drawee  to  the  payment 
of  an  admitted  liability  of  the  drawer.  It  is  not  necessary  that  the  drawer  of  a  bill 
should  have  funds  in  the  hands  of  the  drawee.  A  check  in  such  case  would  be  a 
fraud."— 10  Wall.,  604,  647. 


124  THE  SECOND  BANK  OP  THE  UNITED  STATES 

ferences  not  one  was  of  practical  interest  to  the  community, 
because  in  actual  use  the  bank  took  advantage  only  of  the 
power  to  sign  the  drafts  by  others  than  the  president  and 
cashier  at  Philadelphia.  Nor  would  it  have  paid  to  take 
advantage  of  any  other  difference.  What  was  wanted  was  a 
substitute  for  notes,  not  an  instrument  of  different  proper- 
ties whose  use  would  have  aroused  suspicion  and  thwarted 
the  very  ends  sought.  As  to  the  other  differences,  the  only 
ones  from  which  the  bank  could  by  any  possibility  reap  an 
advantage  were  those  by  which  it  might  issue  drafts  of  a 
lesser  denomination  than  five  dollars  and  refuse  payment  of 
all  drafts  excepting  at  the  parent  office.1  Had  the  bank 
attempted  to  use  either  of  these  legal  rights,  however,  the 
appropriate  punishment,  imposing  a  penalty  greater  than 
any  benefit  gained,  would  have  been  found  immediately  in 
the  refusal  of  the  treasury  to  take  them  in  payments  to  it. 
In  that  case  their  circulation  would  have  been  diminished, 
their  credit  impaired,  and  the  very  purposes  for  which  they 
were  created  completely  thwarted. 

In  actual  use,  therefore,  the  bank  made  no  discrimination 
between  branch  notes  and  branch  drafts.  Hence,  where 
notes  were  receivable,  drafts  were  receivable,  and  the  same 
rules  obtained  in  regard  to  redemption,  payment,  and  deposit. 
Consequently,  if  branch  drafts  were  dangerous,  branch  notes 
must  have  been  equally  so;  if  the  issue  of  one  kind  of 
paper  was  injurious  to  the  community,  the  same  must  have 
been  true  of  the  other.  These  facts  even  the  enemies  of 
the  bank  were  forced  to  admit,  while  laboring  in  vain  to 
explain  them  away.  Thus  Benton  in  his  incoherent  attack 
violently  asserted  that  they  were  payable  only  at  Philadel- 
phia, but  a  moment  later  granted  that  they  were  sometimes 

i  The  ability  to  refuse  payment  of  12  per  cent,  interest  on  non-payment  might 
have  been  an  advantage  if  it  existed,  but  only  in  case  of  the  bank's  failure.  The 
fact  that  the  government  was  not  bound  to  take  them  in  receipt  of  revenue  payments 
was  a  positive  disadvantage  to  the  bank. 


125 


paid  at  other  branches.1  Biddle  stated  the  whole  matter 
clearly  and  succinctly  over  and  over  again.  "The  branch 
draughts,"  he  said,  "being,  in  practice,  substitutes  for 
branch  notes,  are  considered  in  all  respects  the  same.  Like 
branch  notes,  those  of  five  dollars,  are  received  at  all  the 
branches;  those  above  five  dollars  are  not  necessarily 

received Branch  draughts  of  all  denominations  are 

received  on  account  of  the  Government,  and  those  only  of 
five  dollars  are  necessarily  received  on  account  of  individ- 
uals." 2  These  statements  are  corroborated  by  the  bank 
correspondence  on  the  subject,3  and  no  evidence  was  ever 
adduced  to  show  a  different  usage. 

The  judgment  of  Professor  Sumner,  the  one  able  econo- 
mist who  has  treated  at  length  the  history  of  the  bank,  is 
invariably  cited  as  conclusive  against  the  drafts.  It  becomes 
of  moment,  therefore,  to  point  out  some  misapprehensions 
into  which  he  seems  to  have  fallen.  For  instance,  he  de- 
clares brusquely  that  the  drafts  "had  no  true  converti- 
bility." *  Since  the  drafts  were  treated  in  precisely  the  same 
manner  as  the  notes,  they  had  just  the  same  amount  of  con- 
vertibility— no  more,  no  less.  If  they  were  not  convertible, 
the  notes  were  not  convertible;  but  no  one  has  ever  reached 
the  point  of  asserting  that  the  notes  possessed  "no  true  con- 
vertibility." Again,  he  appears  to  believe  that  the  branch 
drafts  as  a  currency  device  to  be  substituted  for  notes  were 
issued  in  1818,  speaking  of  the  "revival  of  the  use  of 
branch  drafts"5  in  1827.  Here  there  seems  to  be  a  con- 
fusion of  the  branch  drafts  as  a  currency  device  with  the 
customary  drafts  drawn  by  the  bank.  The  ordinary  bank 
drafts  did  not  need  reviving  in  1827,  for  they  had  been  used 

1  C.  D.,  Vol.  VIII,  Part  I,  pp.  139, 140.  2  3.  D.  79,  22d  Cong.,  1st  Sess.,  p.  2. 

3  Cashier  at  New  York  to  Jaudon,  Sept.  28,  1833;  8.  D.  17,  23d  Cong.,  2d  Sess.,  p. 
120 ;  Jaudon  to  New  York  cashier,  Sept.  30,  1833,  ibid, 

*  Life  of  Jackson  (revised) ,  p.  303. 

5  Banking  in  the  United  States,  p.  186 ;  though  elsewhere  he  describes  the  actual 
facts  in  connection  with  the  "  invention  "  of  branch  drafts. 


126  THE  SECOND  BANK  OP  THE  UNITED  STATES 

by  banks  ever  since  banks  existed  in  the  United  States,1  and 
were  used  without  intermission  by  the  bank  during  the 
period  when  the  "branch  draft"  was  doing  the  work  of  the 
ordinary  note.  But  these  credit  devices  were  the  same  only 
in  form.2  The  ordinary  draft  was  drawn  for  large  sums,  was 
transferable  only  by  indorsement,  and  in  1818  certainly  was 
supported  by  no  provision  for  payment,  and  did  not  circulate 
to  any  considerable  extent.  The  "  branch  drafts  "  differed  in 
all  these  particulars.  They  were  for  small  sums;  they  were 
transferable  by  delivery;  they  were  supported  by  a  fund 
created  from  the  simultaneous  purchase  of  bills  of  exchange ; 
and,  above  all,  they  were  intended  to  circulate,  and  did  circu- 
late, as  a  bank-note  currency.  They  were  as  different  from 
the  customary  bank  drafts  as  were  the  notes  themselves.3 

As  Sumner  considers  the  drafts  possessed  of  no  true  con- 
vertibility, he  naturally  holds  that  they  were  not  promptly 
redeemed.  They  "  had  cut  loose,"  he  asserts,  "  from  actual 
redemption  in  capital,"  *  and  might  be  indefinitely  inflated. 

ifl".  R.  460,  22d  Cong.,  1st  Sess.,  p.  51,  Binney's  opinion. 

2  It  may  be  said,  however,  that  they  could  perform  the  same  functions.    In  that 
case  one  is  at  a  loss  to  understand  why  so  much  noise  should  be  made  over  the  inven- 
tion of  branch  drafts,  and  why  anyone  should  regard  them  as  illegal. 

3  Sumner,  in  denying  convertibility  to  the  drafts,  asserts,  too,  that  they  "  were  in 
form  redeemable  where  issued,  but  in  intention  and  practice  they  were  redeemed 
hundreds  of  miles  away." — Andrew  Jackson  (revised),  p.  303.    The  drafts  were  not 
"  in  form  redeemable  where  issued,"  but  only  at  Philadelphia,  while  in  practice  they 
were  redeemed  where  issued,  at  Philadelphia  and  at  many  of  the  other  offices. 
His  confusion   of  this  species  of  note  with  the  ordinary  bank  draft   is   again 
apparent  when  he  quotes  Gallatin  in  regard  to  the  drafts.    Gallatin  is  here  (ADAMS, 
Gallatiri's  Works,  Vol.  Ill,  p.  265)  speaking  of  the  ordinary  use  of  bank  drafts,  and 
arguing  that  they  are  part  of  the  circulation,  as  is  shown  by  his  adding :  "  Though 
not  usually  included  in  the  amount  of  circulation  of  the  bank,  we  cannot  but  con- 
sider the  average  amount  in  circulation  as  making  part  of  the  currency  of  the  coun- 
try."   Now,  this  statement  will  not  in  the  least  apply  to  branch  drafts,  which  were 
always  "  included  in  the  amount  of  the  cirulation." — H.  R.  460,  22d  Cong.,  1st  Sess., 
p.  56 ;  8.  D.  79,  22d  Cong.,  1st  Sess.,  p.  4.    Gallatin's  remarks  are  no  doubt  confusing, 
since  he  speaks  of  the  "branch  draft"  at  the  beginning  of  the  paragraph,  and  does 
not  clearly  discriminate  between  the  two  when  he  proceeds  to  discuss  the  ordinary 
bank  draft. 

*  "  It  was  proved  that  they  had  none  of  the  character  of  convertible  bank-notes 
or  money,  but  were  instruments  of  credit,  and,  like  all  instruments  of  credit  which 
have  cut  loose  from  actual  redemption  in  capital,  there  was  no  more  limit  to  their 
possible  inflation  than  to  the  infinity  of  human  hopes  and  human  desires."— Andrew 
Jackson  (revised) ,  pp.  313,  314. 


THE  BRANCH  DRAFTS  127 

To  this  the  answer  is  always  ready  that  the  drafts  differed 
in  absolutely  no  respect  from  the  notes,  and  objections 
against  them,  to  be  valid,  must  be  valid  as  against  the  notes. 
But  one  does  not  need  to  urge  this  general  objection.  The 
truth  is  that  the  drafts  did  not  embarrass  the  bank  because 
they  had  "  cut  loose  from  redemption,"  but  that  in  many 
cases  they  had  to  be  redeemed  too  soon ;  not  that  they  stayed 
out  too  long,  but  that  they  did  not  stay  out  long  enough. 
More  than  once  they  had  to  be  paid  before  the  bills  of  ex- 
change, from  whose  payment  the  funds  for  redemption  were 
to  come,  were  themselves  paid.  Thus  in  February,  1832, 
the  cashier  at  the  parent  bank  urges  the  cashier  at  Cincin- 
nati to  keep  down  his  loans,  because  otherwise  "  the  circu- 
lation connected  with  it  must  press  uncomfortably  upon  the 
institution "  in  the  East,1  and  Biddle,  writing  to  the  presi- 
dent of  the  Charleston  branch  in  January,  1834,  distinctly 
states  that  the  branch  circulation  embarrasses  the  bank  at 
its  eastern  offices,  because  it  is  presented  there  for  redemp- 
tion before  the  bills  of  exchange  on  which  the  notes  were 
issued  are  themselves  paid.2  Nor  will  it  do  to  reason,  as  did 
Benton,3  that  the  bank  could  not  hinder  the  branches  from 
pouring  out  streams  of  this  paper,  for  the  drafts  were  all 
prepared  at  Philadelphia  in  blank  and  dispatched  thence  to 
the  offices.4  Consequently  all  that  was  necessary  to  stop  the 

1  Feb.  4,  H.  R.  460,  22d  Cong.,  1st  Sess.,  p.  526. 

2  "  There  is  one  point,  however,  to  which  particular  attention  is  at  present  neces- 
sary.   Your  purchases  naturally  throw  into  circulation  large  masses  of  your  notes, 
which  soon  find  their  way  to  the  north,  and  being  immediately  paid,  create  a  charge 
upon  the  bank  and  the  northern  offices ;  while  in  the  present  disturbed  state  of  pri- 
vate credit,  many  of  the  houses  upon  which  bills  are  drawn,  find  it  extremely 
difficult  to  meet  their  engagements  without  indulgence,  and  an  extension  of  time 
from  the  bank  itself,  so  that  the  notes  must  be  paid  by  the  bank,  and  the  bills  to 
meet  them  are  not  paid  by  individuals."— Jan.  30, 1834,  S.  D.  17,  23d  Cong.,  2d  Sess., 
p.  79 ;  see  also  letter  of  Biddle  of  date  Jan.  24, 1834,  to  New  Orleans  office,  ibid.,  p.  81 ; 
and  Ex.  Doc.  8,  22d  Cong.,  2d  Sess.,  p.  27,  Report  of  Committee  of  Offices,  July  27, 1832. 

3  C.  D.,  Vol.  VIII,  Part  I,  p.  138. 

^  "And  the  entire  control  of  the  issues  of  them  [i.  e.,  branch  drafts]  is  preserved 
by  having  them  all  prepared  and  registered  at  the  bank  itself,  and  forwarded  for  dis- 
tribution, wanting  only  the  signatures  of  the  presidents  and  cashiers  of  the  offices." 
—Biddle  to  Secretary  Rush,  Jan.  10, 1828,  H.  R.  460,  22d  Cong.,  1st  Sess.,  p.  54. 


128  THE  SECOND  BANK  OP  THE  UNITED  STATES 

branches  from  issuing  the  drafts  was  to  refuse  to  forward 
any  further  supply  to  them.1 

Seventeen  branches  issued  this  species  of  currency,  those 
not  doing  so  being  Philadelphia,  Boston,  New  York,  Balti- 
more, Portsmouth,  Hartford,  Portland,  Washington,  and 
Richmond.  From  this  list  it  will  be  seen  that  the  drafts 
were  employed,  as  intended,  in  the  West  and  South,  and, 
indeed,  four-fifths  of  all  the  drafts  issued  in  1832  were  put 
out  at  eight  offices  —  two  in  the  South,  and  the  other  six  in 
the  West  and  Southwest.2 

It  is  important  to  know  what  amount  of  this  currency  was 
in  circulation  in  1832,  since  knowledge  of  this  fact  will  help 
to  determine  the  share  which  the  drafts  had  in  the  expansion 
of  the  issues  of  the  bank  and  in  the  inflation  of  the  cur- 
rency. Benton,  without  knowing,  assumed  that  the  amount 
ran  up  into  untold  millions.3  The  bank,  however,  sent  in  a 

1  Sumner,  believing  that  the  drafts  were  responsible  for  most  of  the  errors  and 
embarrassments  of  the  bank,  naturally  lays  too  much  to  their  charge.    "They 
were  a  most  unlucky  invention.    Most  of  the  subsequent  real  troubles  of  the  bank 
can  be  traced  to  them." — Banking  in  the  United  States,  p.  186.    And  again,  in  speak- 
ing of  the  embarrassments  of  1832:  "The  position  in  which  the  bank  found  itself 
was  a  result  of  the  working  of  the  branch  drafts.    Their  effect  was  just  beginning  to 
tell  seriously,  and  it  was  cumulative  in  a  high  ratio." — Ibid.    The  truth  is,  if  the  bank 
made  investments  in  the  West  and  Southwest  in  1831-32,  loans  which  were  virtually 
permanent  were  inevitable,  branch  drafts  or  no  branch  drafts.    Again,  speaking  of 
the  charges  against  the  bank  in  1832,  Sumner  notes  that  one  of  them  was  the  "  expan- 
sion of  the  circulation  by  $1,300,000  between  September  1,  1831,  and  April  1,  1832, 
although  the  discounts  had  been  reduced  during  the  winter."    He  adds :  "  The  bank 
was  struggling  already  with  the  branch  drafts,  and  this  struggle  produced  the  facts 
which  were  alleged." — Ibid.,  p.  204.    It  would  be  curious,  to  say  the  least,  if  circu- 
lation should  have  increased  to  a  considerable  extent,  while  discounts  were  falling. 
On  examination  it  is  apparent  that  the  facts  alleged  did  not  exist.    The  real  state  of 
affairs  was  as  follows :  In  the  time  specified  the  circulation  had  increased  $2,500,000, 
almost  double  the  amount  named  by  Professor  Sumner.    The  discounts,  however, 
had  not  fallen  off  during  the  winter.    On  the  contrary,  they  were  on  April  2  $4,400,000 
in  excess  of  what  they  were  on  the  2d  of  September,  1831,  and  they  had  not  been  at  as 
low  a  figure  through  the  winter  as  they  were  on  the  2d  of  April.    Moreover,  the  pur- 
chase of  bills  of  inland  exchange  aggregated  $7,600,000  more  on  the  2d  of  April,  1832, 
than  on  the  2d  of  September,  1831.— Monthly  Reports  of  the  Bank,  Ex.  Doc.  523,  22d 
Cong.,  1st  Sess.    Surely  an  increase  of  $2,500,000  in  the  circulation  was  not  excessive 
in  the  face  of  an  increase  in  loans  of  $12,000,000. 

2  For  localities  see  note  3,  p.  129. 

3  "  Fifty  signers  at  work,  and  one  hundred  and  fifty  endorsing  clerks,  pouring 
out  from  five  and  twenty  places  their  perennial  streams  of  paper." — C.  D.,  Vol.  VIII, 
Part  I,  p.  138. 


THE  BRANCH  DRAFTS  129 

return  on  the  subject  for  January,  1832,  which  was  as  fol- 
lows: whole  amount  issued,  $10,781,000;  gross  circulation, 
$7,410,000;  net  circulation,1  $5,029,000.2  The  entire  net 
circulation  of  the  bank  at  this  time  was  $21,080,000.  The 
proportion  of  drafts  to  the  whole  is,  therefore,  less  than  one- 
fourth.  The  showing  left  Benton  crestfallen,  and  it  can 
hardly  be  held  that  the  drafts  played  a  very  large  part  in 
the  inflation  of  the  bank's  issues.  That  must  have  been  to 
a  much  greater  extent  the  result  of  branch  notes  of  large 
denominations  used  in  the  purchase  of  western  and  southern 
bills.  A  comparison  at  the  eight  offices  which  issued  four- 
fifths  of  all  the  branch  drafts  in  1832  shows  that  they 
circulated  almost  twice  the  amount  of  notes,  and  only  three 
offices  —  Pittsburg,  Lexington,  and  Louisville  —  had  a  larger 
circulation  of  drafts  than  of  notes.3 

Benton  made  other  charges  which  seem  to  be  counte- 
nanced by  Sumner.  Thus  he  asserts  that  the  drafts  drove 
specie  out  of  the  West  and  put  that  section  irrevocably  in 
debt.*  The  charges  do  not  seem  worthy  of  credit.  Sumner 

1  In  computing  which,  notes  in  transitu,  or  worn  out,  were  subtracted. 

2  fif.  D.  79,  22d  Cong.,  1st  Sess.,  p.  2.    $5  drafts,  $1,991,000;  $10,  $2,428,000;  $20, 
$610,000.    See  also  H.  R.  460,  22d  Cong.,  1st  Sess.,  p.  57,  for  April,  1832;  issued,  $10,781,- 
635;  ou  hand,  $3,371,545;  gross  circulation,  $7,410,090;  net  circulation  (calculated), 
$5,928,072;  and  S.  D.  17,  23d  Cong.,  2d  Sess.,  p.  64,  for  Oct.  1, 1834:  issued,  $12,341,212; 
on  hand,  $5,565,465 ;  gross  circulation,  $6,775,747 ;  net  circulation,  $5,164,037. 

3  Drafts  and  notes,  January,  1832,  net  circulation  (four-fifths  of  gross) : 

Drafts  Notes 

Fayetteville $381,740  $  492,010 

Savannah 344,604  699,996 

New  Orleans 726,740  2,536,580 

Nashville 503,476  1,311,664 

Louisville 535,008  470,712 

Lexington 640,356  548,149 

Cincinnati 482,048  561,994 

Pittsburg 415,560  385717 

Total $4,029,532    $7,006,822 

— H.  R.  460,  22d  Cong.,  1st  Sess.,  p.  536,  and  S.  D.  79,  22d  Cong.,  1st  Sess.,  p.  4. 
*  "  It  is  this  illegal,  irresponsible  currency  which  has  enabled  the  bank  to  fill  the- 
Union  with  debtors  in  chains,  who  scream  incessantly  for  the  life  and  glory  of  their 
Juggernaut,  and  attack  with  the  fury  of  wild  beasts  every  public  man  who  will  not 
square  his  public  conduct  by  the  devouring  miseries  of  their  own  private  condition, 
and  the  remorseless  cravings  of  their  insatiate  idol."— C.  D.,  Vol.  VIII,  Part  I,  p.  139, 


130  THE  SECOND  BANK  OP  THE  UNITED  STATES 

himself  contradicts  the  assertion  of  driving  away  specie  when 
he  says:  "The  branch  drafts  were  transferring  the  capital 
of  the  bank  to  the  western  branches,  and  locking  it  up  there 
in  accommodation  paper  indefinitely  extended  by  drawing 
and  re-drawing."1  Now,  the  drafts  could  hardly  drive  the 
specie  out  of  the  West  and  simultaneously  transfer  the  capi- 
tal of  the  bank  to  the  same  part  of  the  country  and  lock  it 
up  there.  Moreover,  as  already  shown,  the  real  state  of 
affairs  was  that  the  drafts  were  sometimes  paid  in  the  East 
before  the  funds  were  furnished  from  the  West,  and  those 
funds  were  usually  forwarded,  not  in  the  form  of  specie,  but 
in  the  form  of  bills  of  exchange  bottomed  on  the  crop  and 
drawn  on  the  eastern  offices  or  on  New  Orleans.  Specie 
did,  indeed,  flow  from  the  West  to  the  East,  for  the  simple 
reason  that  specie  was  the  cheapest  commodity  in  which  the 
West  could  pay  many  of  its  debts.  Most  of  the  specie,  how- 
ever, came  from  Mexico,  and  complaint,  if  justified,  should 
have  been  made  by  that  country.  Whether  such  drawing 
away  of  specie  would  constitute  a  casus  belli,  Benton  did  not 
intimate. 

As  to  the  second  charge,  that  of  impoverishment  by  the 
issue  of  drafts,  it  would  be  indeed  surprising  if  the  effect  of 
loaning  to  a  poor  country  was  to  impoverish  it.  The  usual 
opinion  has  always  been  that  such  loans  are  of  great  assist- 

Jan.  20, 1832.  "  In  the  next  place,  these  orders  are  impoverishing  and  destructive  to 
the  States  in  which  they  are  issued,  because  they  lead  to  the  abduction  of  its  gold 
and  silver.  If  notes  are  issued,  they  are  payable  at  the  branch  bank,  and  an  ade- 
quate supply  of  gold  and  silver  must  be  kept  on  hand  to  redeem  them ;  but  these 
orders  being  drawn  on  Philadelphia,  the  gold  and  silver  of  the  State  must  be  sent 
there  to  meet  them."— Ibid.,  p.  140.  "The  people  of  the  country  are  in  debt  for  this 
paper,  the  greater  part  of  them  at  second  and  third  hand,  borrowers  from  borrowers, 
paying  rack-interest  to  the  intermediate  lenders.  The  labors  of  the  year  barely  suf- 
fice for  the  payment  of  the  sixty  days'  collection  of  all  this  interest.  The  principal 
is  still  behind,  to  come  upon  these  exhausted  countries  when  delayed  payment  has 
doubled  the  difficulty  of  making  payment." — Ibid.,  p.  141.  Sumner  says  apropos  of 
such  remarks :  "  So  far  as  the  branch  drafts  after  1827  helped  to  produce  this  result, 
the  bank  had  some  share  in  it,  but,  as  there  were  then  very  few  banks  of  issue  in  the 
Valley,  a  greater  amount  of  specie  was  probably  retained  at  that  time  than  ever 
before."— Banking  inthe  United  States,  p.  203. 
l  Ibid.,  p.  206. 


THE  BRANCH  DBAFTS  131 

ance  in  the  development  of  a  new  country,  and  that  it  is 
only  by  procuring  loans  that  the  country  can  be  developed. 
To  be  sure,  the  bank  received  interest  on  its  loans  and 
expected  to  recover  the  principal.  Perhaps  this  was  what 
Benton  objected  to.  But,  after  all,  it  was  hardly  fair  to  ask 
that  it  should  give  away  its  capital  or  make  loans  for  nothing. 
Benton  should  have  perceived,  too,  that  the  bank  had 
no  means  of  forcing  its  loans  upon  the  people  of  the  West, 
and,  if  they  contracted  debts  at  the  bank,  they  did  so  because 
it  was  to  their  interest  to  do  so. 

A  portion  of  the  population  of  the  West  undoubtedly  had 
a  grievance  —  that  portion  which  was  constituted  of  bankers 
and  note-shavers.  They  were  justified  in  hating  the  bank 
because  it  reduced  their  note  issues  and  monopolized  the 
exchange  transactions ;  it  put  an  end  to  much  of  their  busi- 
ness, to  almost  all  of  their  bad  business,  and  at  the  same  time 
compelled  them  to  loan  at  lower  rates  than  would  have  been 
possible  had  the  bank  been  out  of  the  field.  As  these 
results  were  secured  to  a  considerable  extent  through  the 
use  of  branch  drafts,  their  righteous  hatred  was  naturally 
transferred  to  this  currency. 

In  conclusion  one  may  repeat  briefly  the  points  which 
seem  to  have  been  established :  In  use  the  drafts  were  notes 
to  all  intents  and  purposes ;  in  law  they  were  checks  or  bills 
of  exchange ;  as  notes,  those  of  the  denomination  of  $5  were 
redeemed  at  all  the  offices,  and  the  others  usually  at  all  the 
offices,  and  always  at  Philadelphia  and  the  issuing  office ;  all 
were  taken  everywhere  in  payments  to  the  government; 
where  notes  were  depreciated,  drafts  would  be  depreciated 
to  the  same  extent ;  they  were  readily  convertible ;  they  were 
only  a  small  part  of  the  circulation ;  they  did  not  abstract 
specie  from  the  West ;  and  they  were  not  necessarily  danger- 
ous to  the  interests  of  the  bank. 


CHAPTER  VII 

THE  RESULTS  OF  BIDDLE'S  SYSTEM 

THE  branch  drafts  were  invented  in  1827.  By  July, 
1828,  the  bank  had  proved  its  ability  to  check  the  business 
of  the  state  banks,  put  an  end  to  depreciated  state-bank 
currencies,  issue  a  full  supply  of  its  own  notes,  and  secure 
control  of  the  exchange  business  of  the  country.  By  July, 
1831,  its  success  was  complete,1  and  Biddle,  in  the  triennial 
report  to  the  stockholders,  gave  utterance  to  a  veritable 
pasan  of  victory  while  explaining  what  had  been  done. 

Naturally  enough  he  laid  more  stress  upon  the  impor- 
tance of  his  measures  to  the  public  than  on  their  value  to  the 
bank,  for  the  project  of  securing  a  renewed  charter  was  now 
full-blown,  and,  if  he  could  carry  home  to  the  people  the  convic- 
tion of  the  bank's  indispensableness,  the  chances  of  getting 
the  new  charter  would  be  much  enhanced.  "The  experi- 
ment," he  declared,  had  been  to  see  in  how  far  the  bank 
could  supply  a  sound  and  uniform  currency  of  extensive  cir- 
culation, while  reducing  "the  necessary  expenses  of  com- 
mercial intercourse  between  distant  sections"  of  the  country.2 
He  emphasized  the  importance  of  these  exchange  dealings 
in  the  interests  of  commerce,  and  explained  how  the  bank, 
by  its  extensive  participation  in  them,  and  especially  in  for- 
eign exchange,  staved  off  monetary  stringencies  and  periodic 
bank  curtailments,  which  otherwise  would  inevitably  ensue 

1  The  depreciation  of  state-bank  notes  was,  on  the  whole,  lower  in  1831  than  in 
any  other  year  from  1817  to  1837.—  S.  D.  457,  23th  Cong.,  2d  Sess.,  pp.  126-30. 

2  "The  experiment  was  interesting  and  hazardous.    It  was  to  try  how  far  the 
institution  could  succeed  ....  in  diffusing  over  so  wide  a  surface  of  country  a  currency 
of  large  amount  and  of  uniform  value  at  all  places  and  under  all  circumstances ;  and 
also  whether  it  could  bring  down  to  its  extreme  limit  the  necessary  expense  of  com- 
mercial intercourse  between  distant  sections  of  country,  whose  exchangeable  pro- 
ductions were  of  such  various  and  unequal  values." — NILES,  Vol.  XLI,  p.  114. 

132 


RESULTS  OP  BIDDLE'S  SYSTEM  133 

because  of  the  slender  stock  of  the  precious  metals  in  the 
country.1  The  bank,  he  asserted,  had  now  fulfilled  "all  the 
purposes  for  which  it  was  created,"  and  was  in  the  true 
sense  of  the  word  a  national  bank.2 

Undoubtedly  the  country  and  the  business  community 
were  the  beneficiaries  of  a  sound  currency  and  a  low  rate  of 
exchange,3  but  the  jubilation  was  not  all  on  account  of  the 
good  people  of  the  United  States,  for  it  was  not  forgotten 
that  "these  purposes  have  been  accomplished  without  any 
sacrifice  of  the  interests  of  the  stockholders."  *  "  The  inter- 
ests of  the  stockholders,"  on  the  contrary,  had  been  fully 
cared  for.  This  was  notably  evident  from  the  figures  for 
exchange.  For  the  year  ending  June  30,  1831,  the  bank 
had  purchased  $44,053,520.10  in  bills  of  domestic  exchange 
and  had  sold  drafts  to  the  extent  of  $42, 123, 161. 23. 5  Dis- 
counts, too,  had  run  from  $32,877,000  to  $41,448,000.  The 
increase  in  the  two  species  of  investments  aggregated  $14,- 
400,000.  Meanwhile,  however,  the  bank  had  parted  with 
$7,000,000  in  funded  debt,  so  that  the  actual  increase  in 
investments  was  $7,400,000.  The  change  meant  a  much 
greater  total  profit,  since  discounts  paid  6  per  cent,  and 
inland  exchange  at  least  9  per  cent.,  while  funded  debt  was 
at  4  and  5.  In  other  respects  the  state  of  the  bank's  affairs 
was  equally  gratifying.  Loans  on  bank-stock  securities  had 
almost  ceased.6  The  suspended  debt  had  been  reduced  from 
$10,426,000  in  1822  to  $3,633,000  in  1831;  the  loan  of 
1821,  amounting  to  $1,180,880,  had  been  paid;  the  contin- 
gent fund  had  been  increased  so  that  it  more  than  covered 
all  losses;  the  surplus  was  $1,698,102.93;  since  July  1, 
1828,  net  circulation  had  increased  over  $8,000,000,  private 

1  Ibid.,  p.  115.  2  ibid.,  pp.  115,  117. 

3  "  At  present  these  exchanges  are  generally  either  at  par,  or  at  the  utmost  one- 
half  of  one  per  cent."—  Ibid.,  p.  116. 

*  Ibid.,  p.  117.  5  ibid.,  p.  116. 

6  Ibid.,  p.  117.    Loans  on  bank  stock,  1822,  $5,974,725.80;  1831,  $779,458.07. 


134  THE  SECOND  BANK  OP  THE  UNITED  STATES 

deposits  over  $2,700,000,  specie  over  $5,500,000,  and  net 
annual  profits  over  $380,000.*  The  song  of  triumph  was 
not  unjustified. 

But  there  were  flies  in  the  ointment.  While  increasing 
the  bank's  transactions  and  its  profits,  Biddle  had  extended 
its  dealings  in  the  Southwest  and  West  out  of  all  proportion, 
and  in  doing  so  had  returned  to  that  policy  of  extensive  inte- 
rior loans  of  which,  in  1823,  he  felt  sure  that  the  bank  had 
had  "enough  and  more  than  enough."  It  is  true  that  he 
had  perfected  a  system  of  operations  which,  if  faithfully 
executed,  completely  transformed  the  situation,  but  he  should 
have  known  that  the  men  who  had  to  execute  that  plan  were 
not  likely  to  execute  it  faithfully,  in  which  case  the  bank 
would  suffer  loss  and  perhaps  ruin. 

There  was  a  number  of  reasons  why  Biddle  had  turned 
deliberately  to  the  task  of  building  up  a  large  banking  busi- 
ness in  the  West  and  Southwest.  For  one  thing,  the  steady 
payment  of  the  public  debt  had  put  an  end  to  the  bank's 
holdings  of  public  stock  and  compelled  it  to  invest  its  means 
in  other  ways.  In  July,  1831,  the  government  had  even 
liquidated  its  stock-note  for  $7,000,000  which  it  had  given 
in  1817  for  its  shares  in  the  bank's  capital  stock,2  and  by 
November  of  1831  the  bank  was  left  without  a  cent  of  gov- 
ernment funded  debt  —  a  diminution  in  this  species  of  invest- 
ment of  $17,000,000  since  July  1,  1828.  Biddle  at  first 
attempted  to  supply  the  lack  of  government  stock  by  invest- 
ments in  that  of  the  states,  offering  a  loan  of  $8,500,000  at  5 
per  cent,  to  Pennsylvania  in  1829,3  while  in  September, 
1830,  he  was  eagerly  inquiring  as  to  the  chances  of  getting 
Louisiana  and  Mississippi  stocks.4  These  efforts  failing,  some 
other  disposition  of  the  funds  had  to  be  made.  To  put  them 

1  NILES,  Vol.  XLI,  pp.  117,  118 ;  also  Appendix  V.  *  Ibid.,  p.  112. 

3  Biddle  to  George  Hoffman,  Dec.  15, 1829,  P.  L.  B.,  Vol.  Ill  p.  106. 
*  Biddle  to  Jaudon,  Sept.  7, 1830,  ibid.,  pp.  338,  339. 


RESULTS  OF  BIDDLE'S  SYSTEM  135 

out  in  the  East  and  the  South  from  1827  to  1831  was  impos- 
sible, for  there  the  bank's  loans  diminished  during  this  period 
in  spite  of  constant  efforts  to  keep  them  up.1  Competition 
in  the  East  was  excessive,  there  being  a  great  deal  of  capital 
to  be  had  on  easy  terms.  In  Boston  the  total  business  of 
the  branch  fell  from  $4,150,000  in  January,  1827,  to  $629,- 
000  in  January,  1829,  a  diminution  of  $3,500,000.a  Bank- 
ing in  the  West  and  Southwest  was  therefore  the  only 
resource.  Moreover,  Biddle's  system  of  branch  drafts  and 
dealings  in  exchange  contemplated  this,  and  consequently 
necessity  and  inclination  joined  hands  to  push  the  bank  into 
this  field. 

No  sooner  had  the  plans  for  extensive  banking  in  these 
distant  sections  begun  to  work,  however,  than  unforeseen 
causes  gave  rise  to  an  overwhelming  demand  for  loanable 
capital.  The  years  1831-32  were  indeed  years  of  phenomenal 
growth  in  trade,  industry,  and  internal  improvements.  "  The 
introduction  of  the  new  means  of  intercourse,"  says  Sumner, 
"  produced  a  development  of  industry  so  great  as  to  amount 
to  a  revolution,  so  sudden  as  to  create  a  convulsion." 3  In 
1825  the  Erie  Canal  was  completed,  and  in  1828  the 
Baltimore  and  Ohio  Railroad  was  begun.  But  the  effect 
upon  business  produced  by  these  means  of  communication, 
though  large,  was  not  comparable  to  that  resulting  from  the 
extensive  application  of  steam  to  water  transportation.  By 
1825  steamboats  were  found  everywhere  from  the  Hudson  to 
the  Mississippi.  The  result  was  a  tremendous  reduction  in 
the  cost  of  transportation,  an  enormous  increase  in  the 
volume  of  production,  and  a  marked  diminution  of  the  price 
of  the  commodities  transported.  The  American  industry 
most  profoundly  affected  was  the  cultivation  of  cotton,  a 

1  See  monthly  statements  for  the  period,  Appendix  V. 

2  Biddle  to  T.  H.  Perkins,  June  7, 1831,  P.  L.  B.,  Vol.  Ill,  p.  533. 

3  SUMNEE,  History  of  American  Currency,  p.  90. 


136  THE  SECOND  BANK  OF  THE  UNITED  STATES 

commodity  in  great  request  after  1824.  The  demand  for 
cotton  led  to  brisk  speculation  in  southern,  and  especially 
southwestern,  real  estate,  and  to  a  less  extent  in  western 
lands.  Times  were  good  and  everyone  wanted  to  borrow; 
there  were  enormous  importations  from  Europe,  and  the 
revenue  was  unusually  large.  Under  the  spur  of  excessive 
demands  and  largely  increased  facilities  for  loaning,  it  is 
not  surprising  that  the  bank  expanded.  So  intense  was  the 
pressure  for  loans,  and  so  willing  was  the  bank  to  grant 
them,  that  in  1831,  contrary  to  all  precedent,  its  accommo- 
dations were  not  reduced  during  the  summer  months.1  The 
urgent  demand  for  money  continued  through  1832,  and  the 
effort  to  meet  it  would  have  taxed  all  the  resources  of  a 
much  larger  "monster"  than  the  Philadelphia  one. 

The  result  was  that  the  bank's  loans  increased  to  an 
astonishing  extent,  as  was  evident  from  Biddle's  exposition 
in  1831.  By  May,  1832,  he  would  probably  not  have  been 
so  completely  satisfied  with  the  situation.  By  that  time, 
counting  from  May  1,  1828, 2  the  investments  of  the  bank 
had  increased  from  $54,800,000  to  $70,400,000,  an  increase 
of  $15,600,000  in  four  years.  Remarkable  as  this  increase 
was,  the  really  remarkable  fact  about  it  was  that  discounts 
and  domestic-exchange  purchases  had  been  augmented  in 
this  period  by  $33,100,000,  almost  double  their  total  in 
May,  1828,  domestic-exchange  dealings  alone  increasing  by 
$17,360,000.  Other  significant  items  were  the  increase  in 
circulation,  $10,578,000,  in  total  deposits,  $2,762,000;  while 
specie  had  hardly  increased  at  all,  the  amount  held  on  May 
1,  1828,  being  $6,318,000,  and  on  May  1,  1832,  $7,890,000. 
Thus,  while  the  immediate-demand  liabilities  of  the  bank 
had  risen  by  $13,340,000,  the  ability  to  meet  them  had 

IS.  D.  17,  23d  Cong.,  2d  Sess.,  p.  97. 

2  The  1st  of  May,  1832,  is  deliberately  selected  as  being  the  moment  at  which  the 
bank's  dealings  were  most  extended. 


RESULTS  OF  BIDDLE'S  SYSTEM  137 

increased  by  only  $1,572,000.  Meanwhile  the  bank  owed 
$1,878,122.29  in  Europe. 

How  far  the  West  and  Southwest  were  responsible  for 
this  enormous  expansion  a  few  figures  will  clearly  reveal. 
On  May  1,  1828,  the  discount  and  exchange  dealings  of  the 
bank  in  those  sections  of  the  country  had  been  $13,697,000 
out  of  a  total  of  $39,352,000;  on  May  1,  1832,  the  sum  was 
$36,419,000  out  of  a  total  of  $70,400, OOO.1  In  other  words, 
the  western  and  southwestern  loans  had  increased  from  a 
little  over  one-third  of  the  whole  to  over  one-half  of  the 
whole,  the  number  of  offices  doing  this  enormous  business 
being  nine  out  of  a  total  of  twenty-six,  established  almost 
exclusively  in  cities  of  moderate  size.2  Since  the  dealings 
in  inland  exchange  were  responsible  for  this  state  of  affairs, 
they  deserve  full  consideration. 

At  the  time  of  the  bank's  establishment  the  phrase 
"equalization  of  exchange  "  was  used  in  three  senses:  first, 
in  that  of  putting  an  end  to  the  depreciation  of  state-bank 
notes;  secondly,  in  that  of  real  exchange;  thirdly,  in  that  of 
putting  an  end  to  the  discount  on  bank  notes  which  was  due 
to  their  being  at  a  distance  from  their  place  of  issue  and 
redemption.  This  confusion  of  use  led  people  to  believe 

i Southwest  and  West:  Natchez,  Mobile,  New  Orleans,  Nashville,  Louisville, 
St.  Louis,  Lexington,  Cincinnati,  Pittsburg,  (Chillicothe  agency). 

Discounts  Bills  of  Exchange  Totals 

May  1, 1828— 
Southwest 
All  others 

May  1, 1829— 
Southwest 
All  others 


d  West        -       - 

$10,701,000 
91  959  000 

$  2,996,000 
3,696,000 

$13,697,000 
25  655  000 

19  
d  West 

0  (April  30)- 
d  West        -       - 

12,001,000 
21,623,000 

14,164,000 
19,640,000 

4,757,000 
4,509,000 

6,577,000 
4,237,000 

16,758,000 
26,132,000 

20,741,000 
23,877,000 

id  West 

15,872,000 
20,061,000 

9,144,000 

5,822,000 

26,016,000 
25,883,000 

id  West 

22,467,000 
24,905,000 

13,952,000 
9,100,000 

36,419,000 
34,005,000 

All  others 

May,  1831— 
Southwest 
All  others 

May,  1832— 
Southwest 
All  others 

—Compiled  from  the  monthly  reports  of  the  bank. 

>  New  Orleans  excepted. 


138  THE  SECOND  BANK  OF  THE  UNITED  STATES 

that  the  bank  ought  not  to  charge  for  making  exchanges  for 
the  public.  The  banks  of  the  day  rarely  dealt  in  exchange,1 
and  considerable  hostility  was  aroused  when  the  Bank  of  the 
United  States  undertook  to  charge  a  premium  for  purchas- 
ing and  collecting  bills.  At  the  very  first  hint  of  such  action 
Secretary  Crawford  came  forward  with  violent  objections,2  and 
the  House  committee  of  1819  disparaged  the  practice.3  This 
hostility  was  never  allayed.  Moreover,  it  was  asserted  that 
the  bank  used  bills  of  domestic  exchange  as  a  device  to 
secure  usurious  rates  on  its  loans ;  *  Clayton  declared  that  in 
this  way  the  bank  extorted  12  per  cent,  interest.5 

Gallatin,  on  the  other  hand,  asserted  that  the  bank's 
transactions  along  this  line  constituted  one  of  the  three 
principal  advantages  derived  from  a  national  bank,  and  one 
which  accrued  to  the  community  at  large.6  Besides,  the 
bank  had  to  keep  specie  on  hand,  and  at  times  transport  it, 
in  order  to  make  exchanges.  Moreover,  interest  and  pre- 
mium together  must  be  less  than  the  cost  of  transporting 
specie ;  otherwise  they  would  not  be  paid.  It  was  only  just, 

i"That  institution  [i.  e.,  the  Bank  of  the  United  States],  at  some  period  subse- 
quent to  the  commencement  of  its  operations  in  February,  1817,  entered  upon  the 
business  of  a  dealer  in  inland  bills  of  exchange  by  buying  and  selling  bills  upon  all 
points  where  its  branches  were  located,  upon  terms  that  gave  it  a  profit  on  the  trans- 
action. This  practice  probably  gave  rise  to  the  general  custom  now  prevailing 
amongst  banks  of  buying  and  selling  bills  of  exchange." — RAGDET,  pp.  114, 115. 

2 "The  exaction  of  one-fourth,  or  one-half,  or  one  per  cent,  on  checks  drawn  on 
one  office  of  discount  upon  another,  ....  will  as  effectually  convince  the  com- 
munity of  the  prostration  of  its  rights  and  interests  at  the  will  of  the  bank  as  the 
exaction  of  ten  per  cent.  It  is  the  establishment  of  the  principle,  and  not  the 
amount  of  the  exaction,  which  will  exhibit  the  power  of  the  bank  to  levy  contribu- 
tions on  the  commerce  of  the  nation  ad  libitum." — July  3,  1817,  F.,  Vol.  IV,  p.  540. 
The  whole  letter  is  a  protest  on  the  subject  of  the  bank's  system. 

3  Ibid.,  Vol.  Ill,  p.  309.  *  BENTON,  Thirty  Tears,  Vol.  I,  p.  240. 

5  C.  D.,  Vol.  VHI,  Part  II,  p.  1977. 

6 "The  principal  advantages  derived  from  the  Bank  of  the  United  States,  .... 
are,  therefore,  first  and  principally,  securing  with  certainty  a  uniform,  and,  as  far  as 
paper  can,  a  sound  currency ;  secondly,  the  complete  security  and  great  facility  it 
affords  to  the  Government  in  its  fiscal  operations ;  thirdly,  the  great  convenience  and 
benefit  accruing  to  the  community  from  its  extensive  transactions  in  domestic  bills 
of  exchange  and  inland  drafts."— ADAMS,  Qallatiri's  Writings,  Vol.  Ill,  pp.  345,  346. 


RESULTS  OF  BIDDLE'S  SYSTEM  139 

therefore,   that    the   community  should    pay  the    premium 
asked.1 

This  reasoning  furnished  a  complete  answer  to  the  foolish 
arguments  that  a  national  bank  ought  to  make  exchanges 
without  charging  for  them.  But  it  must  be  noted  that, 
complete  as  the  answer  is  to  the  objections  against  the  sale 
and  purchase  of  drafts,  it  does  not  at  all  touch  the  other 
objection,  that  the  discount  of  bills  was  a  device  to  extort 
more  than  the  6  per  cent,  rate  of  interest  allowed  by  the 
bank's  charter.  When  this  charge  was  made,  Biddle 
answered  it  by  describing  the  operation  of  purchasing  a 
bill  of  exchange  with  interest  at  6  per  cent,  and  1^  per 
cent,  premium,  hinting  that  the  bank's  accuser  had  con- 
founded "two  things  distinct  in  themselves,  but  necessarily 
blended  in  the  same  operation" — the  interest  on  the  bill, 
and  the  premium  on  the  bill.2  But  this  explanation  is  not 
to  the  point.  The  charge  was  that  the  bank  forced  its  cus- 
tomers to  purchase  bills  on  their  crops  when  they  desired 
instead  to  discount  notes,  and  that  by  doing  this  it  secured 
more  than  the  legal  rate  of  interest.  Undoubtedly  this 
was  true,3  and  it  is  plain  enough  that,  in  the  case  explained 
by  Biddle,  if  the  borrower  paid  6  per  cent,  on  the  loan  and 

i "  For  the  bank  to  be  always  in  the  market,  ready  to  buy  domestic  bills,  or  to 
sell  drafts,  to  suit  the  varying  demands  of  commerce,  it  must,  on  occasions  of  unusual 
disturbances  of  the  course  of  trade,  be  compelled  to  transmit  specie  from  place  to 
place ;  for,  whatever  may  be  the  supposed  credit  of  its  paper,  when  there  has  been 
an  extraordinary  accumulation  of  it  at  any  one  point,  the  bank  at  that  place  must 
be  reinforced  with  an  addition  of  specie;  more  especially,  when  the  balance  of 
foreign  commerce  is  against  the  place.  It  is,  then,  obviously  just,  that  the  bank 
should  be  compensated  for  performing  this  office ;  and  which,  if  it  did  not  perform, 
must  devolve  upon  some  other  part  of  the  community.  The  premiums  and  discounts 
paid  to  the  bank  must  be  less  than  the  expense  of  transporting  specie,  or  they  would 
not  be  paid;  and  the  difference  is  a  net  gain  to  the  community,  by  the  operations  of 
the  bank."— TDCKEK,  The  Theory  of  Money  and  Banks  Investigated,  p.  301. 

2H.  R.  460,  22d  Cong.,  1st  Sess.,  p.  47. 

3  "  For  the  last  two  seasons,  my  attention  has  been  steadily  applied  to  the  lessen- 
ing our  note  business,  by  a  substitution  of  bills  to  the  amount  of  such  reduction ;  but 
in  this,  I  have  not  been  so  successful  as  I  could  wish,  because  it  is  the  interest  of  the 
merchants  to  counteract  this  policy."— Cashier  at  Nashville,  Oct  21, 1832,  S.  D.  4,  22d 
Cong.,  2d  Sess.,  p.  32. 


140  THE  SECOND  BANK  OP  THE  UNITED  STATES 

1£  per  cent,  as  exchange,  he  paid  for  a  bill  at  ninety  days  at 
the  rate  of  12  per  cent,  per  annum.1  The  method  was  a 
common  one  at  that  date  to  evade  the  laws  of  usury.8 
Twelve  per  cent,  was  the  market  rate,  of  course,  and  the 
result  only  illustrates  the  truth  that  the  market  rate  and  not 
the  legal  rate  must  be  paid,  if  the  borrower  wishes  to  be 
accommodated.  It  should  be  noted,  too,  that  bills  of 
exchange  were  really  used  in  such  cases  not  so  much  to 
obviate  the  transfer  of  funds  as  to  make  loans.  Almost  all 
the  bill  operations  of  the  Bank  of  the  United  States  were 
nothing  more  or  less  than  a  species  of  discount. 

In  the  first  years  of  the  bank's  existence  dealings  in 
exchange  were  very  slight  and  unimportant.  The  volume 
of  the  business  in  October,  1819,  was  only  $1,375,087,  and 
it  did  not  reach  $2,000,000  until  May,  182*0.  The  year  1822 
shows  the  first  considerable  increase,  the  figures  for  July 
being  $3,273,305  and  the  total  purchases  for  the  year 
amounting  to  $7,353, 190. 56. 3  The  reports  for  the  succeed- 
ing years  to  1827  show  a  slight  increase,  but  real  and 
marked  growth  did  not  begin  until  that  year,  with  the  adop- 
tion of  Biddle's  system.4 

It  was  part  of  Biddle's  plan  to  secure  control  of  the  entire 
business  of  the  country  in  inland  exchange.5  The  bank,  there- 
fore, worked  with  this  object  in  view,  and  by  1832  had 
almost  accomplished  it.6  Competition  in  exchange  was,  of 
course,  perfectly  free,  but  the  Bank  of  the  United  States 
secured  a  virtual  monopoly  by  offering  to  individuals  advan- 

1  In  1829  domestic  bills  purchased  were  $28,000,000 ;  profit,  $650,000,  or  $210,000  in 
excess  of  the  discount,  an  average  of  %  of  1  per  cent. ;  equal  to  9  per  cent,  per  annum. 
— Biddle  to  Joseph  Hemphill,  Dec.  19, 1829,  P.  L.  B.,  Vol.  Ill,  p.  117. 

2  RAGUET,  p.  107.      3  TYLER,  S.  D.  17, 23d  Cong.,  2d  Sess.,  p.  25.      <  See  Appendix  VI. 

5  Jaudon  to  the  cashier  at  Cincinnati,  Oct.  3, 1832,  H.  R.  121,  22d  Cong.,  2d  Sess., 
p.  148. 

6 TUCKER,  p.  300.  "Though  they  [i.  e.,  the  state  banks]  had  always  been  com- 
petitors for  it  [i.  e.,  inland  exchange  business]  ....  yet  they  did  not  prove  highly 
successful  in  their  efforts  till  since  1832." — Woodbury's  report,  8.  D.  13,  23d  Cong.,  2d 
Sess.,  p.  13. 


KESULTS  OP  BIDDLE'S  SYSTEM  141 

tages  not  furnished  by  other  competitors — in  other  words, 
better  rates.  It  can  surprise  no  one  that  such  was  the  case. 
The  bank  had  decided  advantages  over  all  other  competi- 
tors. It  had  branches  all  over  the  United  States,  and  there- 
fore its  machinery  was  much  more  suitable  and  adequate 
than  that  of  any  state  bank,  while  its  large  capital  per- 
mitted it  to  deal  in  exchange  far  more  extensively  than  other 
institutions. 

The  rates  of  exchange  between  the  western  offices  and 
from  the  West  and  South  to  the  East  and  North  ranged 
from  par  to  2^  per  cent.  The  average  rate  was  probably 
from  par  to  1^  per  cent.,1  the  average  for  1829  being  less 
than  three-fourths  of  1  per  cent.2  The  rates  from  the  East  to 
the  West  and  South  were  much  higher  than  the  rates  on  the 
East  from  the  South  and  West.  Between  the  eastern  offices 
the  rates  were  low.  The  rates  in  the  West  on  other  western 
offices  were  high,  in  order  to  discourage  bills  drawn  on  west- 
ern cities,  since  it  was  considered  that  good  and  paying  bills 
should  be  drawn  on  the  East  or  on  New  Orleans.  Thus  the 
rates  between  the  western  offices  were  almost  as  high  as  the 
rates  on  the  East,  and  sometimes  higher  than  these. 

Not  only  did  the  bank  buy  bills,  but  it  sold  drafts.3  Each 
of  the  offices  sold  drafts  on  the  others  and  on  state  banks. 
These  operations  were  also  very  considerable,  amounting  in 
1829  to  $24,384,232,*  and  in  1832  to  $45, 157,424. 5  The 

1  See  Appendix  VII. 

2  "  The  gross  profit  on  the  purchase  of  bills,  arising  from  the  rate  of  exchange 
at  which  they  were  purchased,  amounted,  in  the  year  1829,  to  227,224  dollars  or  less 
than  three-fourths  per  cent." — ADAMS,  Gallatiri's  Writings,  Vol.  Ill,  p.  343.    Wood- 
bury  points  to  the  fact  that  the  state  banks  bought  exchange  cheaper  than  the  Bank 
of  the  United  States.    He  uses  the  rates  of  1834.    These,  of  course,  are  not  apropos. 
One  might  as  well  use  state-bank  figures  for  1839. 

3  "  These  consist  of  two  correlative  but  distinct  operations.  The  bank  purchases 
at  Philadelphia  and  at  every  one  of  its  offices  bills  of  exchange  payable  at  different 
dates  and  on  all  parts  of  the  United  States  where  there  are  such  offices,  and  the  bank 
and  its  offices  sell  their  drafts  on  each  other  payable  at  sight."— ADAMS,  Gallatin's 
Writings,  Vol.  Ill,  pp.  343,  344 

*Ibid.,  p.  343.  ss.  D.  17,  23d  Cong.,  2d  Sess.,  p.  180. 


142  THE  SECOND  BANK  OP  THE  UNITED  STATES 

premium  charged  for  selling  drafts  was  slightly  lower  than 
that  on  bills  of  domestic  exchange.  It  ranged  from  par  to  ^  and 
1  per  cent.  The  most  common  rate  was^  per  cent.1  Besides 
selling  its  own  drafts,  the  bank  collected  drafts  drawn  by 
other  institutions  and  individuals.  The  amount  of  this  side 
of  its  exchange  business  was  large.2  The  charge  for  collect- 
ing was  moderate. 

The  Southwest  and  West,  as  already  pointed  out,  consti- 
tuted the  great  field  for  these  operations.  What  was  the 
proportion  of  the  whole  business  done  in  these  sections? 
Early  dealings  were  slight,  aggregating  some  $8,890,000  in 
1824  and  being  less  than  29  per  cent,  of  the  bank's  entire 
purchases  of  inland  exchange  bills.  In  1827  they  were  32  per 
cent. ;  in  1829,  almost  46  per  cent. ;  in  1830,  over  56  per  cent. 
In  1832  they  were  over  60  per  cent.,  and  did  not  again 
fall  below  50  per  cent,  until  1835.  Here  was  a  remark- 
able increase  in  the  proportion  of  the  business  done  in  the 
West  and  Southwest  to  the  whole  business  done,  running 
from  less  than  29  per  cent,  in  1824  to  over  60  per  cent,  in 
1832.3  In  the  former  year  the  western  dealings  were  not  as 
large  as  the  southern  and  only  a  little  over  half  as  large  as 
those  of  the  North  and  East,  while  in  1832  they  were  in 
excess  of  those  of  the  North,  East,  and  South.  That  is,  nine 
offices  in  the  Mississippi  and  Ohio  valleys  did  a  larger  busi- 
ness in  exchange  than  all  the  other  offices  combined. 

But  this  comparison  of  the  business  of  the  West  and 
Southwest  as  against  total  business  does  not  reveal  all  the 
significance  of  this  surprising  increase,  for  business  in  the 
East  and  South  was  by  no  means  at  a  standstill.  Hence,  to 
get  a  true  conception  of  exchange  transactions  in  the  West 
and  Southwest,  one  must  compare  the  business  in  that  local- 
ity with  itself  at  different  periods.  In  1824  the  total  sum 

i  See  Appendix  VII.        2 $42,096,062.07  in  1832.— S.  D.  17,  23d  Cong.,  2d  Sess.,  p.  180. 
3  See  Appendix  VIII. 


RESULTS  OF  BIDDLE'S  SYSTEM  143 

of  western  and  southwestern  purchases  was  $2,540,000;  in 
1828,  $8,140,000;  in  1831,  $27,000,000;  in  1832,  $40,900,- 
000.  That  is,  the  volume  of  the  purchases  of  exchange  in 
these  sections  had  more  than  trebled  from  1824  to  1828,  was 
over  ten  times  greater  in  1831  than  in  1824,  and  over  six- 
teen times  greater  in  1832  than  in  1824.1  This  simple  state- 
ment reveals  at  a  glance  the  increase  of  exchange  invest- 
ments in  the  Southwest  and  West  in  accordance  with  Biddle's 
plans.  The  sale  of  drafts  had  increased  in  a  like  ratio. 

The  offices  which  did  most  of  the  business  were  only  four 
or  five  in  number.  Thus  from  1829  to  1832,  including  both 
these  years,  the  four  offices  of  New  Orleans,  Nashville,  Louis- 
ville, and  Lexington  did  over  four-fifths  of  all  the  exchange 
business  of  the  West  and  Southwest.  For  the  remaining 
years  of  the  history  of  the  bank  the  first  three  of  these 
offices,  with  the  addition  of  the  two  branches  of  Mobile  and 
Natchez,  did  over  four-fifths  of  the  whole.  Lexington 
becomes  much  less  important,  while  Natchez,  an  office  started 
late  in  the  life  of  the  bank,  more  than  takes  its  place.  New 
Orleans,  being  the  great  entrepot  for  all  the  commerce  of 
the  Mississippi  valley  and  the  valleys  tributary  to  the  Mis- 
sissippi, was  the  center  of  exchange  operations ;  it  was  the 
branch  where  most  bills  were  purchased,  and  on  which  the 
offices  of  the  West  drew  most  bills.8  About  two-fifths  of 

1  The  figures  are  computed  from  the  added  monthly  totals. 

2  Biddle  describes  the  system  thus :  "  It  will  be  perceived,  ....  that,  ....  the 
funds  of  the  bank  have  naturally  sought  a  temporary  employment  in  those  sections  of 
the  Union  where  there  is  less  banking  capital,  and  where  the  productions  of  the  great 
staples  of  the  country  seem  to  require  most  assistance  in  bringing  them  into  the 
commercial  market.    This  observation  applies  especially  to  New  Orleans,  the  centre 
and  the  depository  of  all  the  trade  of  the  Mississippi  and  its  tributaries.  The  course 
of  the  western  business  is  to  send  the  produce  to  New  Orleans,  and  to  draw  bills 
on  the  proceeds,  which  bills  are  purchased  at  the  several  branches,  and  remitted 
to  the  branch  at  New  Orleans.    When   the  notes  issued  by  the  several  branches 
find  their  way  in  the  course  of  trade  to  the  Atlantic  branches,  the  western  branches 
pay  the  Atlantic  branches  by  drafts  on  their  funds  accumulated  at  the  branch  in 
New  Orleans,  which  there  pay  the  Atlantic  branches  by  bills  growing  out  of  the  pur- 
chases made  in  New  Orleans  on  account  of  the  northern  merchants  or  manufac- 
turers, thus  completing  the  circle  of  the  operations.   This  explains  the  large  amount 
of  business  done  at  that  branch."—  H.  R.  460,  2'2d  Cong.,  1st  Sess.,  pp.  316,  317. 


144  THE  SECOND  BANK  OF  THE  UNITED  STATES 

the  exchange  transactions  of  the  four  or  five  offices  already 
noted  was  done  by  New  Orleans  alone,  or  from  over  34  to 
over  45  per  cent,  of  the  exchange  purchases  throughout  the 
whole  of  the  western  country,  and  from  over  15  to  over  33 
per  cent,  of  these  transactions  throughout  the  entire  country.1 
Of  the  offices  in  the  West  which  ranked  next  after  the  New 
Orleans  branch,  sometimes  one,  sometimes  another  engaged 
more  extensively  in  this  line  of  banking.2 

On  what  offices  were  most  of  these  bills  drawn?  Biddle 
states  that  the  bills  were  "  purchased  at  the  several  branches  " 
in  the  West,  "and  remitted  to  the  branch  at  New  Orleans." 
This  office  paid  the  eastern  offices  for  the  collection  of  the 
western  note  issues  "  by  bills "  on  the  East  growing  out  of 
the  purchases  "made  in  New  Orleans  on  account  of  the 
northern  merchants  or  manufacturers."  In  other  words, 
the  western  branches  drew  on  New  Orleans,  and  New 
Orleans  on  the  eastern  offices.  In  the  main  the  statistics 
available  bear  out  the  assertions.  It  is  to  be  noted,  however, 
that  during  1831  and  1832  this  system  of  operations  was 
not  adhered  to.  The  drawings  in  the  West  and  Southwest 
on  western  cities  increased  very  materially,  a  state  of  affairs 
which  was  not  contemplated  in  the  beginning  and  extremely 
undesirable.3 

i  Biddle,  in  his  explanation  of  the  business  to  the  committee  of  1832,  gave  a  table 
containing  the  amount  of  the  business  in  exchange  for  1831.  The  total  is  $48,562,185.32, 
and  of  this  sum  the  purchases  at  New  Orleans  footed  up  $9,470,184.38,  or  over  19  per 
cent,  of  the  whole.  The  amount  accredited  to  all  the  western  and  southwestern 
offices  is  $22,452,760.32,  which  gives  over  42  per  cent,  of  the  business  of  the  West  in 
exchange  to  New  Orleans.—  H.  B.  460,  22d  Cong.,  1st  Sess.,  p.  318.  Similarly,  figures 
for  the  year  1832  give  the  whole  amount  of  exchange  bought  at  $67,517,000.  The 
amount  at  New  Orleans  is  $13,251,000,  or  over  19  per  cent,  of  the  entire  sum.  In  the 
•western  offices  these  dealings  footed  up  a  total  of  $34,627,000,  of  which  the  sum  accred- 
ited to  New  Orleans  is  over  37  per  cent.—  S.  D.  17, 23d  Cong.,  2d  Sess.,  p.  180.  At  p.  192 
a  table  shows  practically  the  same  facts  for  1833 ;  total,  $71,761,370.86.  New  Orleans's 
share,  $14,439,367.80,  or  over  20  per  cent.  Total  western,  $32,582,000 ;  New  Orleans  over 
40  per  cent,  of  this. 

2£T.  R.  460,  22d  Cong.,  1st  Sess.,  pp.  316,  317 ;  see  Appendix  VIII. 

3  According  to  McDuffie's  table  for  March,  1830,  total  dealings  in  domestic 
exchange  were  for  that  month  $10,100,000.  The  sum  purchased  in  the  West  equaled 
$5,700,000,  of  which  $2,100,000  were  drawn  on  the  Atlantic  offices,  mostly  by  the  branch 


RESULTS  OP  BIDDLE'S  SYSTEM  145 

Though  the  bank  had  expanded  everywhere  through  the 
years  1831  and  1832,  it  was  as  a  consequence  of  the  extrava- 
gant dealings  in  inland  exchange  in  the  Southwest  and  West 
that  the  greater  part  of  the  debt  to  it  had  been  created, 
and  in  this  particular  it  acted  incautiously  and  foolishly. 
Adams  was  convinced  ' '  that  the  Bank  had  been  somewhat 
imprudent  in  her  issues  and  accommodations"  in  1831 ;' 
and  one  of  the  directors  at  New  York  wrote  Biddle  that  "  as 
it  turned  out  we  done  harm  last  fall"  by  "letting  out."2 
The  situation  was  summed  up  exactly  by  a  Philadelphia 
banker,  no  doubt  Girard,  who,  after  seeing  the  report  of  the 
bank's  condition  for  1831,  wrote  to  a  friend  : 

I  confess  I  am  alarmed  at  the  picture.  Their  loans  have  been 
increased  in  the  year  from  forty-five  to  sixty-six  millions,  while 
their  specie  has  decreased  from  twelve  to  seven  millions.  The  bank 
has  now  outstanding  that  vast  amount  of  loans  —  (which  it  will  be 
difficult  to  reduce  or  call  in,)  its  specie  low  —  no  funds  in  Europe 
to  draw  for;  on  the  contrary,  in  debt  a  million  and  a  half  — 
exchange  at  eleven  per  cent,  premium  —  specie  shipping  by  every 
packet  —  ....  more  than  twenty  millions  of  their  notes  in  circu- 
lation, which  the  pressure  of  the  times  will  bring  back  upon  them 
rapidly  —  and  their  private  deposites  liable  to  be  withdrawn.  They 
have  acted  like  madmen,  and  deserve  to  have  conservators  appointed 
over  them.3 

Having  unduly  expanded,  the  bank  found  itself  in  a 
perilous  situation  by  October,  1831.  Specie  was  rapidly 

at  the  mouth  of  the  Mississippi.  Of  the  remaining  $3,600,000,  $2,500,000  were  drawn  on 
the  same  office,  leaving  only  $1,100,000  bought  on  the  offices  up  the  Mississippi, 
mostly  by  the  branches  down  the  Mississippi.— H.  R.  358,  21st  Cong.,  1st  Sess.,  pp. 
39-41.  According  to  the  figures  in  Toland's  report  for  the  month  of  October,  1832,  out 
of  a  total  of  $16,304,000  expended  in  the  purchase  of  inland  bills  of  exchange,  $10,053,- 
000  were  spent  in  the  West  and  Southwest.  Out  of  this  sum  only  $1,545,000  were 
drawn  on  the  East,  while  $7,300,000  were  drawn  on  the  West  and  Southwest.  The 
amount  drawn  on  New  Orleans  was  a  little  over  one-half  of  the  whole,  being  $3,900,- 
000.  The  remaining  $3,331,000  were  drawn  on  other  western  offices.— 8.  D.  4,  22d 
Cong.,  2d  Sess.,  p.  12.  Ex.  Doc.  8,  22d  Cong.,  2d  Sess.,  is  identical  with  8.  D.  4. 

1  J.  G.  Watmough  to  Biddle,  May  11, 1832,  B.  P. 

2  Saul  Alley  to  Biddle,  March  21, 1832,  ibid. 

3  Cambreleng,  quoting  letter  of  Feb.  16,  1832,  from  a  dead  banker  friendly  to  the 
bank.—  C.  D.,  Vol.  X,  Part  II,  pp.  2380,  2381. 


146  THE  SECOND  BANK  OP  THE  UNITED  STATES 

running  out  of  the  country,1  a  sure  proof  that  the  paper  cur- 
rency was  redundant  and  prices  inflated.  Directors  were 
urging  that  the  exportation  be  stopped  by  the  sale  of  foreign 
bills  and  expressing  fear  that  the  state  banks  would  secure 
the  bank's  fund  of  specie.2  Meanwhile  the  bank  was  so 
hard  pressed  for  funds  that  Biddle  notified  the  American 
agent  of  the  Barings  that  it  would  be  compelled  to  draw  to 
the  limit  of  its  standing  credit  of  $1,000,000  with  that 
house,  and,  if  possible,  to  increase  the  credit  by  another 
$1,000,000  on  which  bills  of  exchange  might  be  drawn  to 
be  repaid  later  at  5  per  cent.3  The  bank  evidently  could 
not  stop  the  exportation  of  specie,  because  it  lacked  funds 
on  which  to  draw  bills  of  exchange.  The  government  added 
to  the  embarrassment  by  calling  for  its  deposits  in  order  to 
pay  off  part  of  the  public  debt,  and  doing  this  without  giv- 
ing the  bank  timely  notification  of  its  purpose.  The  final 
blow  came  when  the  treasury  demanded  payment  of  $6,000,- 
000  to  discharge  the  3  per  cents.* 

Hereupon,  on  the  7th  of  October,  1831,  the  day  after 
Biddle's  letter  to  the  agent  of  the  Barings,  the  bank  turned5 
to  the  task  of  procuring  the  necessary  means  by  creating  a 

i  Biddle  to  Lawrence,  Dec.  6. 1831,  P.  L.  B.,  Vol.  IV,  pp.  48,  49. 

»  S.  Alley  to  Biddle,  Oct.  17, 1831,  B.  P. 

»  To  T.  W.  Ward,  Oct  6, 1831,  P.  L.  B.,  Vol.  IV,  pp.  28,  29. 

* "  I  never  recollect  any  of  your  Treasury  measures  which  has  worked  mora 
crossly  for  all  concerned."— Biddle  to  A.  Dickins,  Nov.  29, 1831,  ibid.,  pp.  46,  47.  "  I 
wish  you  would  ask  Mr.  McLane  what  he  means  to  pay  next  — and  above  all  let  us 
not  have  any  more  payments  without  a  moment's  warning,  like  the  last  caprice."— 
Biddle  to  Cadwalader,  Dec.  27, 1831,  B.  P.  The  payment  of  public  debt  for  1832  was 
calculated  to  amount  to  $18,080,057.— H.  R.  121,  22d  Cong.,  2d  Sess.,  p.  162.  See 
McLane's  letter,  Sept.  29, 1831,  H.  R.  460,  22d  Cong.,  1st  Sess.,  pp.  542,  543. 

5  "  The  unusually  heavy  reimbursement  of  six  millions  of  funded  debt is 

calculated  to  press  very  inconveniently  upon  the  parent  bank,  and  upon  the  office  at 
New  York ;  the  more  so,  from  our  uncertainty  as  to  the  time  when  the  necessary  pro- 
vision must  be  made,  and  from  the  prevailing  active  demand  for  money.  Be  pleased, 
therefore,  so  to  shape  your  business  immediately,  as  that,  without  denying  reason- 
able accommodations  to  your  own  customers,  or  sacrificing  the  interests  of  your 
office,  you  may  throw,  as  early  as  possible,  a  large  amount  of  available  means  into 
our  hands  in  Philadelphia  and  New  York,  and,  at  the  same  time,  abstain,  as  far  as 
practicable,  from  drawing  upon  either  of  those  points." — Circular  of  Oct.  7,  1831, 
ibid.,  p.  19. 


KESULTS  OP  BIDDLE'S  SYSTEM  147 

contraction  of  its  business,  issuing  orders  to  that  effect  to  all 
the  offices,  instructing  them  to  diminish  discounts  and  to 
purchase  bills  of  exchange  with  the  object  of  transferring 
funds  to  the  East.  Nor  was  the  board  content  with  this, 
but  as  time  passed  it  urgently  repeated  its  orders  again  and 
again.1  Finally,  on  July  29,  1832,  after  seven  months  of 
contraction,  it  issued  instructions  that  "the  western  and 
southern  offices  ....  decline  the  purchase  or  discounting 
of  any  domestic  bills  of  exchange,  except  when  it  may  be 
necessary  to  secure  a  debt  already  due  to  the  bank  or  the 
offices," 2  thus  cutting  off  all  new  loans ;  and  these  stringent 
orders  were  not  relaxed  until  September  29,  1832.3 

In  the  face  of  these  frantic  efforts  to  contract,  the  expan- 
sion of  the  bank's  business  went  steadily  forward  from  Octo- 
ber, 1831,  to  May,  1832.  For  the  entire  period  the  advance 
was  in  the  nature  of  a  triumphal  march,  never  for  one  moment 
suffering  check  or  pause  until,  on  May  1,  the  loans  had 
reached  a  sum  never  before  approached,*  the  contemplation 
of  which  must  have  been  terrifying  to  the  managers.  The 
amount  was  $70,400,000,  as  against  $60,101,000  at  the 
beginning  of  October,  1831,  while  the  net  note  issues  rose 
from  $19,708,000  to  $21,377,000.  The  attempt  to  con- 
tract began  to  show  results,  however,  after  the  beginning 

i  Ibid.,  pp.  521-7 ;  Documents  13-22. 
2-S.  D.  4.  22d  Cong.,  2d  Sess.,  p.  27. 

3ff.  R.  121,  22d  Cong.,  2d  Sess.,  pp.  140, 146.  "Resolved  that  the  Committee  on 
the  Offices  be  authorized  to  modify  the  instructions  under  which  the  offices  of  the 
bank  have  been  acting."— Report  of  Biddle,  Sept.  21, 1832,  ibid.,  p.  27.  "The  Presi- 
dent stated  to  the  board,  that  the  Committee  on  the  Offices,  ....  had  deemed  it 
advisable  so  to  modify  the  instructions  to  the  offices  at  Lexington,  Louisville,  St. 
Louis,  Cincinnati  and  Pittsburg,  as  to  allow  them  to  check  freely  upon  the  bank 
as  heretofore,  and  to  extend  their  purchases  in  domestic  bills." — Minutes  of  Oct. 
4, 1832,  ibid. 

<The  monthly  reports  show  the  following  facts:  The  total  loans  rose  from 
$60,101,000  at  the  end  of  Sept.,  1831,  to  $70,400,000  at  the  beginning  of  May,  1832,  and 
fell  from  $70,400,000  at  the  beginning  of  May  to  $63,600,000  in  October,  standing 
$2,500,000  above  what  they  were  when  the  contraction  began.  The  net  circulation  in 
Oct.,  1832,  was  $19,487,000  as  against  $21,377,000  in  May,  1832.  and  $19,708,000  in  Oct., 
1831.— Ex.  Doc.  523,  23d  Cong.,  1st  Sess. 


148  THE  SECOND  BANK  OP  THE  UNITED  STATES 

of  May.  The  entire  movement  is  clearly  revealed  by  the 
chart. 

The  marked  increase  of  the  bank's  transactions  in  the 
face  of  this  strenuous  attempt  to  reduce  took  place  at  the 
offices  in  the  South,  the  West,  and  the  Southwest,  especially 
at  Charleston,  Savannah,  New  Orleans,  Mobile,  Natchez, 
and  Nashville.  Adding  the  other  western  offices  to  these, 
the  expansion  amounted  to  just  $10,587,000,  counting  from 
the  last  day  of  September,  1831,  to  the  first  day  of  May, 
1832,  actually  exceeding  the  figures  for  the  whole  expansion 
for  that  period.  Taking  the  western  and  southwestern 
branches  alone,  the  total  expansion  was  $9,000,000.  Of  this 
$1,385,000  was  in  discounts,  the  remainder  in  bills  of 
domestic  exchange.1  The  chart  for  these  offices  on  p.  151 
reveals  at  a  glance  the  astonishing  increase. 

Meanwhile  the  bank  had  also  attempted  to  curtail  at  the 
eastern  and  most  of  the  southern  offices,2  with  the  result  of 
keeping  down  loans,  though  contraction  did  not  really  begin 
even  at  Philadelphia  until  the  end  of  May,  1832.3  The 
offices  of  Boston,  New  York,  Baltimore,  and  Philadelphia 
succeeded  most  completely,4  but  at  no  time  did  the  reductions 
equal  the  augmentations  at  the  other  offices.  The  means 

1  The  whole  of  the  bank's  purchases  of  inland  exchange  was,  in  April,  1832, 
$23,052,000,  of  which  the  western  and  southwestern  share  was  $13,952,000 ;  in  June  the 
total  was  $22,577,000,  western  and  southwestern,  $14,342,000.    Reducing  the  matter 
still  further,  the  amounts  of  domestic  exchange  for  New  Orleans,  Natchez,  Mobile, 
and  Nashville  for  three  months  are  as  follows:  April,  $10,594,000 ;  May,  $10,816,OTO ; 
June,  $10,059,000,  being  nearly  half  of  the  business  done  in  domestic  exchange.    This 
at  four  out  of  twenty-six  offices  of  the  bank. 

2  It  has  already  been  pointed  out  that  Savannah  and  Charleston  were  serious 
delinquents.    Slight  failures  to  meet  demands  for  contraction  were  found  at  Rich- 
mond, Norfolk,  Fayetteville,  Burlington,  Hartford,  Portsmouth,  and  Portland. 

3  "  Offerings  today $265,851 

Income 157,647 

Excess  of  offerings 108,204 

Rejected 112,300 

Discounted  within  income  .--.-.-..       $4,096 
"The  first  time  for  many  months  that  we  have  been  able  to  keep  on  the  right 
side."—  Cadwalader  to  Biddle,  May  29, 1832,  B.  P. 

*  For  all  four  offices  the  reduction  from  January  to  November  was  $5,516,000. 


RESULTS  OF  BIDDLE'S  SYSTEM 


149 


CHART    II 


70 


65 


60 


15 


10 


75 


70 


65 


60 


20 


15 


10 


Total  nccommodations 


Inland  exdmngo 


...............  Circulotio 


MOVEMENTS  OP  DISCOUNTS,  OTHER  LOANS,  AND  CIRCULATION,  IN  THE 
FACE  OP  AN  ATTEMPT  TO  CURTAIL  BUSINESS 


150  THE  SECOND  BANK  OF  THE  UNITED  STATES 

secured  in  the  East  thus  went  to  pay  the  debts  incurred 
in  the  other  sections  of  the  country,  and  the  bank  was 
still  without  the  funds  needed  to  meet  the  government's 
requisitions.  That  such  would  be  the  result  had  become 
apparent  to  Biddle  as  early  as  March,  1832,  and  out  of  this 
situation  sprang  the  attempt  to  postpone  the  payment  of  the 
3  per  cent,  stock  which  the  treasury  had  directed  to  be  paid.1 
It  was  only  by  securing  this  postponement  that  the  bank 
could  meet  the  government's  demands.  It  was,  in  short,  in 
a  very  grave  position,  and  had  to  use  every  possible  means 
to  extricate  itself. 

While  there  was  actually  no  diminution  in  the  bank's 
loans,  there  was  a  real  and  severe  pressure  occasioned  by  its 
attempts  to  reduce.  This  would,  of  course,  be  true  in  the 
East  and  South,  for  there  the  bank  had  actually  reduced  its 
accommodations.2  Yet,  curiously  enough,  the  most  intense 
pressure  was  felt  in  the  West,  where  there  had  been  no  con- 
traction whatever.  The  cashier  of  the  branch  at  Cincinnati 
writes  in  November,  1832,  that  the  "demand  for  money" 
at  that  place  is  "enormous,"  and  that  the  branch  would 
"have  a  severe  struggle  for  some  time  to  resist  it."3  The 
cashier  at  Nashville  declares  that  "  bills  of  very  short  dates 
and  of  undoubted  character,  drawn  and  offered  by  persons 
we  were  desirous  to  accommodate,"  have  been  rejected.*  In 
another  letter  he  remarks  on  the  "unexampled  scarcity  of 
money  "  in  Alabama  and  Tennessee,  and  prays  for  the  privi- 
lege of  discounting,  if  that  privilege  is  to  be  extended  to 
any  office,  because  the  branch  at  Nashville  is  the  center  of  a 
population  which  is  suffering  for  the  want  of  a  circulating 

1  See  chap,  xi,  "  Charges  against  the  Bank." 

2 Wayne,  of  Georgia,  declared  that  "the  want  of  money  at  this  moment  is 
driving  our  merchants  to  all  those  shifts  and  expedients  to  raise  it  which  usually 
precede  bankruptcies."— March  13,  1832,  C.  D.,  Vol.  VIII,  Part  II,  p.  2144.  See  also 
NILES,  Vol.  XLII,  p.  20,  and  Vol.  XLIII,  pp.  17, 18.  Evidence  of  Lippincott,  H.  R. 
460,  22d  Cong.,  1st  Sess.,  p.  548;  of  Sullivan,  ibid.,  p.  554 ;  of  Neff,  ibid.,  p.  563. 

3 Nov.  21,  H.  R.  121,  22d  Cong.,  2d  Sess.,  p.  149.  <  Nov.  26, 1832,  ibid.,  p.  154. 


RESULTS  OF  BIDDLE'S  SYSTEM 


151 


CHART    III 


40 


35 


30 


25 


20 


15 


10 


do 
I 


10 


30 


25 


20 


15 


10 


•  Totals 

•  Domestic  exchange 


EXPANSION  AT  THE  WESTERN  AND  SOUTHWESTERN  OFFICES  IN  THE  FACE 
OF  AN  ATTEMPT  TO  CONTRACT,  SEPTEMBER,  1831-32 


152  THE  SECOND  BANK  OF  THE  UNITED  STATES 

medium.1  A  gentleman  in  Cincinnati  writes  that  "  the  dis- 
tress for  money  here  at  present,  is  greater  than  can  be  well 
imagined,  ....  The  brokers  get  readily  one-fourth  of  one 
per  cent,  per  day." :  Similar  complaints  of  a  lack  of  money 
came  from  other  western  offices,  yet  at  this  very  moment  the 
offices  complaining  were  piling  up  debt  upon  debt  by  the 
purchase  of  bills  of  domestic  exchange.  The  explanation  is 
simple:  The  actual  expansion  in  the  West  was  so  much 
below  the  demand  for  loanable  capital  there  that  the  effect 
was  that  of  a  severe  contraction;  and  if  there  had  been  no 
attempt  to  reduce,  the  increase  in  the  amount  of  western 
loans  would  have  been  infinitely  in  excess  of  what  it  was. 

All  this  embarrassment  to  the  bank  and  all  this  distress 
to  the  community  had  arisen  from  Biddle's  plan  of  opera- 
tions in  the  western  and  southwestern  country  at  a  moment 
when  the  demands  for  capital  were  excessive.  The  busi- 
ness of  the  bank  in  these  sections  was  almost  entirely  based 
upon  the  crop.  Money  was  advanced  to  grow  the  crop, 
and  the  loan  paid  out  of  the  proceeds  when  the  crop 
came  to  market.3  The  bills  of  exchange  by  which  these 
loans  were  made  were  frequently  six-months  paper.  In 
case  of  a  sudden  demand  upon  the  bank,  such  paper  was 
certain  to  occasion  considerable  embarrassment.  So  it 
would  if  the  crop  failed  even  partially.  Something  like 
this  is  what  happened  in  1831  and  in  1832.  The  crop  was 
short  in  both  years.4  When  to  this  were  added  excessive 

1 "  It  is  reported  here,  ....  that  the  Louisville  office  has  received  instructions 
to  discount  bills  for  money.  If  this  be  true,  then  allow  me,  ....  to  solicit  similar 
instructions  to  this  office ;  for  I  assure  you,  that  no  portion  of  the  Union  contains  a 
more  suffering  population,  for  lack  of  a  circulating  medium,  than  does  that  portion 
of  which  this  office  is  the  focus." —  Cashier  at  Nashville  to  cashier  at  Philadelphia, 
Oct.  21, 1832,  H.  R..  121,  22d  Cong.,  2d  Sess.,  p.  151. 

2NILE9,  Vol.  XLII,  p.  436,  Aug.  18, 1832,  quoting  from  the  New  York  Courier  and 
Express. 

SH.  R.  460,  22d  Cong.,  1st  Sess.,  pp.  316,  357,  358. 

*NiLES,  Vol.  XL,  p.  271,  and  Vol.  XLI,  p.  34.  See,  however,  pp.  164, 165,  where  ha 
complains  that  low  prices  are  certain  on  account  of  over-supply.  "And,  to  add 


KESULTS  OP  BIDDLE'S  SYSTEM  153 

importations  and  disturbances  arising  from  a  visitation  of 
the  cholera,  it  will  readily  be  supposed  that  the  bank  could 
not  get  its  debts  paid  when  they  fell  due.  Nor  could  it  secure 
foreign  bills  to  send  abroad  in  order  to  check  specie  drains, 
since  foreign  bills  were  drawn  for  the  most  part  upon  the 
cotton  crop.1 

But  if  the  difficulty  had  not  manifested  itself  in  1831-32 
it  would  have  done  so  later,  for  the  cause  lay  in  the  nature 
of  western  loans  and  in  the  character  of  the  western  direc- 
torates ;  it  lay  in  the  purchase  of  bills  at  six  months'  time ; 
in  that  constant  renewing  of  discounts  which  was  customary 
in  the  West  and  Southwest;  in  the  loan  of  money  on  a  crop 
yet  unmarketed,  ungathered,  unsown  even.  This  was  not 
correct  banking;  and,  worse  yet,  the  men  who  had  to  make 
the  loans  were  ignorant,  careless,  and  interested  in  their 
sections  rather  than  in  the  bank. 

The  letters  of  branch  officials  reveal  these  facts  clearly. 
Thus  the  cashier  at  Louisville  wrote  to  Jaudon  in  November, 
1832,  admitting  that  the  difficulties  arose  from  the  too  great 
extension  of  its  loans,2  that  there  had  been  overtrading  at 

to  our  difficulties  last  season,  we  had  a  very  short  crop  of  cotton,  so  that  our 
own  drafts,  predicated  on  the  crop  and  payable  at  New  Orleans,  could  not  be  paid 
out  of  the  crop."— President  of  Nashville  branch  to  Biddle,  Nov.  24,  1832,  H.  R. 
121,  22d  Cong.,  2d  Sess.,  p.  47.  Sommerville,  in  his  letter  of  Oct.  21,  1832,  speaks 
of  "  the  severe  disappointments  ....  occasioned  by  the  unlocked  for  frost  of  the 
25th  October  last." — Ibid.,  p.  149.  Again,  in  November,  he  mentions  "the  dif- 
ficulties of  another  unfavorable  crop,"  and  further  on  in  the  same  letter,  "  the 
redrawing  of  the  last  season,  produced  by  the  failure  in  the  crops  in  that  quarter 
[i.  e.,  Alabama]." — Ibid.,  p.  155. 

1  BIDDLE,  H.  R.  460,  22d  Cong.,  1st  Sess.,  pp.  319,320.    "The  situation  of  the 
country  at  this  period  is  very  delicate.    We  have  had  on  the  one  hand  an  excessive 
importation,  on  the  other  hand  a  crop  short  in  amount,  diminished  in  value  and 
coming  in  at  a  time  unusually  late." — Biddle  to  Samuel  Swartwout,  of  New  York,  Feb. 
27, 1832,  P.  L.  B.,  Vol.  IV,  pp.  189, 190.    For  the  difficulties  arising  from  the  cholera 
alarm,  C.  W.  Lawrence,  New  York,  to  Biddle,  June  28, 1832,  says  that  it  makes  it  diffi- 
cult to  reduce. — B.  P.,  Feb.  9, 1832.    Biddle  anticipated  difficulties  from  that  source. 
—To  I.  Lawrence,  P.  L.  B.,  Vol.  IV,  p.  157. 

2  "Encouraged  by  the  excessive  importations  at  the  east,  our  merchants  have 
been  induced  to  purchase  more  largely  than  their  own  means  or  the  necessity  of  the 
country  required :  hence  the  embarrassment  which  now  exists."— H.  R.  121, 22  Cong., 
2d  Sess.,  p.  145,  Nov.  18, 1832. 


154  THE  SECOND  BANK  OF  THE  UNITED  STATES 

the  branch,  and  that  some  of  the  bills  purchased  comprised 
worthless  paper.1  The  result  was  that  "nothing  but  the 
indulgence  of  the  bank  "  and  "  a  full  year's  products  of  the 
country  "  2  could  relieve  the  situation.  The  position  of  the 
branch  was  one  of  "  peculiar  delicacy."  The  cashier  admits 
that  bills  of  exchange  sent  to  Louisville  to  be  collected  are 
not  collected,  but  other  bills  are  taken  instead.  That  is, 
the  other  branches  forwarded  bills  to  Louisville  for  collec- 
tion, and  the  parties  at  Louisville,  not  being  able  to  pay, 
were  allowed  to  settle  by  selling  other  bills  of  exchange  on 
some  other  branch.  The  amount  of  such  transactions  is  hot 
known,  but  $4,000,000  of  collection  paper  had  been  sent  to 
Louisville  in  the  year  just  past.3  The  branch  could  not 
reduce  its  loans ;  indeed,  for  a  time  they  might  "  be  a  little 
increased,"  because  of  the  "pork  business"  and  "the 
tobacco  and  hemp  exports."  *  The  cashier  at  Pittsburg 
bears  witness  to  similar  conditions,  declaring  that  the  loans 
on  inland  bills  cannot  for  the  present  be  lessened,  and 
admitting  that  the  branch  has  discounted  paper  known  to 
be  objectionable,  since  it  now  declines  all  notes  "not  pay  able 
at  maturity,  and  of  a  business  character."  5  The  cashier  at 

i  "  I  do  not  mean  to  say  all  our  bills  have  a  real  business  origin :  we  are  doubtless 
often  imposed  upon  by  fictitious  transactions."— H.  R.  121,  22d  Cong.,  2d  Sess.,  p.  144. 

2/6td.,p.  145. 

3  "  We  have  been,  and  still  are,  in  a  situation  of  peculiar  delicacy ;  .  .  .  . 

"  A  large  proportion  of  our  bills  were  purchased  to  enable  the  parties  to  meet 
their  obligations  sent  here  for  collection :  the  amount  of  such  collections  has  been 
at  least  four  millions  of  dollars  in  the  past  year,  of  which  about  one  half  came  from 
the  Bank  of  the  United  States  and  the  office  at  New  Orleans. 

"  By  a  hasty  estimate,  the  bills  collected  for  the  office  at  New  Orleans,  amount, 
for  the  past  twelve  months,  to  upwards  of  $1,300,000,  and  a  large  amount  is  still  on 
hand  coming  to  maturity." — Ibid.,  p.  144,  Nov.  18, 1832. 

*Ibid.,  p.  145. 

5  "  In  reply  to  your  letter  of  the  10th  instant,  I  remark,  that  the  bills  purchased 
in  the  west,  are  founded  on  transactions,  and  that  the  amount  could  not  be  lessened, 
at  this  time,  without  inconvenience  to  our  customers ;  but,  in  a  few  months,  I  have 
no  doubt,  the  operations  here,  in  exchange,  will  be  as  limited  as  may  be  desired. 
Our  manufacturers  are  diminishing  their  products,  because  the  office  is  moro 
cautious  in  its  loans,  declining  all  new  notes  which  are  not  payable  at  maturity,  and 
of  a  business  character,  and  calling  in,  by  regular  reductions,  those  on  time  hereto- 
fore discounted."— Nov.  17, 1832,  8.  D.  4,  22d  Cong.,  2d  Sess.,  p.  31. 


RESULTS  or  BIDDLE'S  SYSTEM  155 

Cincinnati  asserts  that  for  the  present  it  seems  impossible 
to  reduce  discounts.  Evidence  of  renewal  is  apparent  here 
also,  for  "  as  fast  as  good  bills  of  exchange  are  offered,  to  be 
applied  to  discounted  notes,  they  are  purchased." l  At 
Nashville  both  the  president  and  the  cashier  of  the  branch 
declare  that  renewal  is  the  best,  in  fact  the  only  means  of 
meeting  the  situation.2  In  the  preceding  October  the  presi- 
dent had  declared  that  the  scarcity  of  money  and  the  refusal 
of  the  branch  to  do  business  where  money  had  to  be 
advanced  had  compelled  the  renewal  of  all  bills  falling  due 
within  the  four  months  preceding,  the  bills  of  exchange  by 
which  the  renewals  were  made  being  purchased  for  six 
months  and  passed  on  to  some  other  office  for  payment. 
"  This  operation,"  he  concluded,  "  has  swelled  our  domestic 
bill  account  very  much,  without  lessening  the  debts  due  to 
this  office  very  sensibly  as  yet." '  Bills  renewed  at  New 
Orleans  had  been  again  renewed  at  Nashville  after  having 
been  sent  there  for  collection.*  A  request  from  Biddle  that 
the  term  for  bills  should  be  restricted  to  four  months 
brought  back  the  answer  that  "bills  payable  six  months 
after  date  "  were  for  as  short  terms  as  "  ought  to  be  taken."  ' 

1  "  Our  discount  line  does  not  go  down  as  fast,  I  am  afraid,  as  the  parent  board 

wish Our  board  are  struggling  to  get  it  down,  and  we  hope  to  be  able  to  do  so 

soon,  but  at  present  it  appears  to  be  impossible." — Nov.  21,  1832,  H.  R.  121,  22d  Cong., 
2d  Sess.,  pp.  148,  149. 

2  Ibid.,  p.  155,  Nov.  26, 1832,  and  ibid.,  p.  47,  Nov.  24, 1832. 

3 "The  unexampled  scarcity  of  money  in  both  Alabama  and  this  State,  and  our 
refraining  from  doing  business  wherein  money  is  to  be  advanced  on  either  note  or 
bill,  has  compelled  us  to  discount  safe  bills  at  six  months  advance,  to  enable  debtors 
to  the  Orleans  and  other  offices  to  meet  the  paper  deposited  with  us  for  collection. 
In  this  way  have  all  the  bills  been  paid  which  were  remitted  to  us  for  collection 
from  the  Orleans  and  other  western  offices  since  the  month  of  June  last " — Ibid., 
p.  150,  Oct.  21, 1832. 

*"In  consequence  of  which,  drafts  to  a  very  large  amount  have  been  drawn  by 
the  commission  merchants  of  New  Orleans  on  their  friends  here,  and  made  payable 
at  this  office.  Those  drafts  could  not  be  met  when  due,  at  this  office,  by  the  payment 
of  cash  on  account  of  its  scarcity ;  and  no  other  means  could  be  resorted  to  but 
drafts  again  on  New  Orleans,  which  our  directory  thought  right  to  purchase." — Ibid. 
p.  47,  Nov.  24, 1832. 

5  Ibid. 


156  THE  SECOND  BANK  OP  THE  UNITED  STATES 

Biddle  admitted  that  many  bills  had  to  be  taken  up  at  Nash- 
ville by  redrafts,  but  considered  the  number  actually  drawn 
excessive.1  In  reply  to  this  the  president  at  Nashville 
acknowledged  that  too  many  bills  were  bought,  "  amounting 
to  more  than  the  present  crop  of  cotton  and  tobacco  will 
pay." J  But  there  was  no  help  for  if;  the  bills  had  to  be 
taken  or  protested,  and  protests  would  have  led  to  many 
failures  and  endless  embarrassments.  The  amount  of  re- 
drafts for  the  summer  and  fall  amounted  to  over  $1,000,000.* 
Notes  and  bills  still  to  fall  due  could  be  met  only  in  the  same 
way,4  while  it  was  probable  that  the  branch  would  add  not 
less  than  $400,000  of  its  own  debts  to  this  total.5  The 
president  of  the  Nashville  branch  declared  that  it  would  be 
impossible  anyhow  to  "get  the  debts  due  this  office  paid; 
....  the  means  "  were  "  not  in  the  country."  8  Payment 
could  not  be  expected  before  May  or  June,  1833.7  The 
officials  complained  that  three  times  the  ordinary  amount  of 
bills  had  been  sent  them  for  collection.8  Under  these  cir- 
cumstances they  considered  it  their  duty  to  renew  the 
notes  maturing  during  October  and  November,  but  when 
these  "mature  again"  they  would  "insist  upon  payment 
either  by  bill  or  otherwise,"  and,  if  the  debtors  did  not  pay 

i"We  are  aware  that  many  bills  have  returned  upon  this  office  which  it  was 
necessary  to  take  up  by  redrafts,  but  still  the  amount  exceeds  much  what  had  been 
anticipated  by  the  board."— H.  R.  121,  22d  Cong.,  2d  Sess.,  p.  46,  Nov.  10, 1832. 

2  Nichol  to  Biddle,  ibid.,  p.  47,  Nov.  24, 1832.  3  ibid.,  pp.  47, 154, 155. 

*  "  There  are  some  thousands  of  dollars  of  bills  from  Orleans  and  other  offices 
yet  to  mature,  which  can  only  be  met  through  our  bill  operations." — Ibid.,  pp.  157, 
158. 

*"  What  portion  of  our  own  debts  may  be  turned  into  bills,  I  cannot  now  form 
a  satisfactory  estimate,  not  less  perhaps  than  $400,000."— Cashier  to  Biddle,  Nov.  26, 
1832,  ibid.,  p.  158. 

o  Nov.  22, 1832,  ibid.,  p.  153.  ?  ibid.,  p.  47. 

8 "The  parent  bank,  and  the  offices  at  New  York,  Baltimore,  Washington,  Rich- 
mond, Pittsburgh,  Cincinnati,  Louisville,  and  Lexington,  have  been  and  still  con- 
tinue the  practice  of  discounting  bills  and  notes  made  payable  at  this  office,  and 
forwarding  them  here  for  collection.  This  has  been  done  this  season,  too,  I  would 
say,  three  times  the  amount  of  any  previous  year."— Ibid.,  p.  47,  Nov.  24, 1832. 


EESULTS  OP  BIDDLE'S  SYSTEM  157 

they  would  bring  suit,  "  unless  in  such  cases  as  justice  would 
dictate  the  propriety  of  further  indulgence."  1  The  propriety 
of  further  indulgence !  At  New  Orleans  the  same  kind  of 
business  was  done,  the  figures  for  renewal  at  Nashville  show- 
ing that  most  of  the  bills  were  drawn  at  New  Orleans.2  Indeed, 
New  Orleans  must  share  with  Nashville  and  Louisville  the 
discredit  of  being  the  source  of  most  of  this  bad  business. 
In  May,  1832,  in  answer  to  a  letter  from  Biddle  express- 
ing astonishment  and  dismay  at  the  bill  purchases  at  New 
Orleans,  Cashier  Jaudon  defended  the  action  of  the  branch. 
This  was  ominous,  for  Jaudon  was  a  tried  employee  of  the 
Philadelphia  office,  and  if  he  could  err  so  grievously  there 
was  little  hope  that  others  would  keep  the  strict  letter  of 
instructions  or  practice  more  conservative  methods.8  The 

i "  Under  such  circumstances,  and  on  mature  reflection,  under  the  difficulties  of 
another  unfavorable  crop,  without  money  to  supply  the  deficiency,  and  frequent  dis- 
cussions on  the  subject,  the  board  considered  it  a  faithful  discharge  of  the  .impor- 
tant responsibilities  confided  to  it,  to  renew  the  notes  maturing  within  the  last  and 
the  present  month,  and  when  these  shall  again  mature,  to  insist  upon  payment, 
either  by  bill  or  otherwise ;  and,  in  the  event  of  failure  to  pay,  to  sue  the  debtor 
unless  in  such  cases  as  justice  would  dictate  the  propriety  of  further  indulgence." — 
Ibid.,  pp.155, 159,  Nov.  26, 1832. 

2  Bills  collected  from  Sept.  1  to  Nov.  26, 1832 : 

Bank  of  the  United  States  ------  $147,473 

New  Orleans 746,893 

All  the  others 203,061 

$1,097,427 

— Ibid.,  p.  157. 

»  Bills  business  of  New  Orleans  for  western  offices  1830-31,  October  to  October : 

Amt.  of  billi  Ami.  of  checks  in  favor  of 

collected  by  B.  U.  S.  &  northern  offices, 

Office  Office  N.  0.  for  drawn  on  N.  0.  office  by 

Nashville $2,421,301.26  $2,350,000 

Louisville        ....  775,002.68  910,000 

Lexington 398,627.33  500,000 

Cincinnati       ....  396,947.25  930,000 

Pittsburg 25,018.82  187,000 

$4,016,897.34  $4,877,000 

"Thus  it  appears,  that  we  are  not  only  obliged  to  pay  at  the  north  the  whole 
amount  of  bills  remitted  to  us  by  the  Western  Offices ;  but  that  we  are  obliged  to  pay 
at  the  north  also,  for  a  large  amount  of  our  notes  which  are  collected  by  the  West- 
ern offices."  Difficult  to  get  northern  funds.  A  further  demand  on  New  Orleans 
from  notes  of  the  offices  taken  in  the  western  country.  New  Orleans  office  at  the  end 
of  its  devices  for  means  to  pay  all  this,  so  have  attempted  payment  by  drawing  bills 


158  THE  SECOND  BANK  OF  THE  UNITED  STATES 

perilous  business  of  the  bank  was  not  entirely  confined  to 
the  West,  however,  for  there  are  hints  of  something  of  the 
sort  at  Richmond *  and  at  Charleston,2  while,  as  already  seen, 
neither  Charleston  nor  Savannah  was  able  to  reduce. 

These  bills  and  drafts  drawn  "to  pay  "other  bills,  drafts, 
and  notes  coming  to  maturity  were  what  were  known  as 
"racers"  or  "race-horse"  bills,  by  which  loans  were  made 
perpetual.  As  a  result  there  was  "the  payment  of  debts" 
up  the  Mississippi  by  bills  on  New  Orleans;  "the payment" 
of  these  by  bills  on  Nashville  and  other  western  offices, 
and  "  the  payment "  of  the  bills  on  these  offices  by  more  bills 
on  New  Orleans  and  on  other  western  towns.  The  iniquity  of 
the  business  was  naively  disclosed  by  an  advocate  of  the  bank 
in  1834,  in  what  he  supposed  was  an  argument  conclusive 
of  the  bank's  usefulness  to  the  West  and  Southwest: 

Commercial  houses,  all  through  the  Western  States  [said  Sena- 
tor Porter  of  Louisiana]  having  credit,  and  doing  business  with 
those  of  our  city,  have  drawn  late  in  the  summer,  or  early  in  the 
autumn,  bills  of  exchange  on  New  Orleans,  and  sold  them  to  the 

on  the  western  country. — Jandon  to  Biddle,  May  16, 1832,  B.  P.  Another  New  Orleans 
statement  of  business  with  western  offices  in  1830-31,  October  to  October : 

Notes  of  this  Office 

Billi  Collected  at  Remitted  to  Us 

Office  this  Office  for  from 

Nashville $547,179.56  $431,940 

Louisville 469,293.54  542,385 

Cincinnati 197,162.67  706,300 

Pittsburgh 65,673.36  193,475 

Lexington 30,714.24  211,430 

$1,310,023.37  $2,085,530 

"This  shews  again,  as  the  former  statement  shewed,  a  sum  of  7  or  8  hun- 
dred thousand  Dollars,  which  we  could  not  find  the  means  of  paying  in  the  West- 
ern Cities ;  and  were  therefore  obliged  to  allow  to  become  a  charge  against  us  at  the 
North."  So  they  are  paid  "by  purchasing  Bills  on  the  western  cities,  and  so  far 
diminishing  the  amount  which  they  can  make  chargable  against  us  at  the  North." 
"Our  notes  collected  at  the  two  great  points,  Nashville  and  Louisville,  are 
nearly  met  by  bills  bought  on  those  places." — Ibid. 

1 "  Your  assurance  that  the  paper  lately  taken  is  of  such  a  character  as  will  not 
require  to  be  renewed,  is  gratifying." — Mcllvaine  to  Eichmond  office,  Jan.  19, 1832, 
H.  R.  460,  22d  Cong.,  1st  Sess.,  p.  518. 

2  Biddle  to  president  of  Charleston  branch  Jan.  30.  1834,5.  D.  17,  23d  Cong.,  2d 
Sess.,  p.  78. 


RESULTS  OP  BIDDLE'S  SYSTEM  159 

branches  established  in  their  respective  States.  With  the  money 
drawn  from  this  source,  the  planter  and  the  farmer  have  been  sup- 
plied, ....  Its  utility,  however,  did  not  stop  here.  A  few  months 
run  round,  the  crops  are  gathered,  delivered  to  the  merchant,  and 
transmitted  to  New  Orleans  for  sale.  There  then  happens  what 
might  be  expected  in  all  cases  where  considerations  of  personal 
advantage  enter  into  the  calculations  we  make  of  the  future.  It  is 
found  that  the  planter  has  estimated  too  largely  his  crop;  he  falls 
in  debt  to  his  merchant,  and  he  in  return  has  a  balance  against  him 
in  the  city  where  the  produce  was  sold.  The  bank  steps  in  again, 
and  purchases  from  the  factor  in  New  Orleans,  a  draft  on  the  House 
in  the  Western  country,  and  in  that  way  enables  the  produce  of  a 
second  crop  to  be  got  to  market  before  payment  is  really  demanded. 
What  I  now  state,  has  been  every  year's  transactions  for  several 
years  back.1 

This  was  renewing  with  a  vengeance,  and,  since  it  had 
been  the  transaction  every  year  "  for  several  years  back,"  it 
follows  that  one  debt  was  piled  on  top  of  another  year  after 
year  and  that  final  payment  was  still  far  in  the  future. 

What  Porter  said  revealed  clearly  enough  the  whole 
situation,  and  a  comparison  of  the  figures  for  exchange  bears 
out  his  statements.  It  shows  that  at  New  Orleans  the  sums 
expended  in  the  purchase  of  bills  were  very  small  in  the 
beginning  of  the  year,  large  in  the  early  summer  months, 
and  small  again  in  the  autumn.  At  Nashville  the  sums  were 
generally  large  at  the  beginning  of  the  year,  and  then 
diminished  till  at  the  end  of  the  year  they  were  very  small. 
The  reason  for  this  difference  lay  in  the  fact  that  bills  were 
drawn  on  New  Orleans  at  Nashville  early  in  the  year,  and 
came  back  renewed  six  months  later  to  Nashville  from  New 
Orleans.  What  proportion  of  the  bills  purchased  in  the 
West  was  of  this  permanent  character  it  is  impossible  to  say. 
Folk's  committee  declared  that,  if  all  the  bills  in  the  Missis- 
sippi valley  were  of  the  same  character  as  those  at  Nash- 
ville, "at  least  $7,000,000"  were  "secured  by  paper"  which 

1  C.  Z>.,  Vol.  X,  Part  I,  p.  706,  Feb.  25, 1834. 


160  THE  SECOND  BANK  OP  THE  UNITED  STATES 

was  "running  from  branch  to  branch,  waiting  for  crops  to 
be  raised  to  meet"  it.1 

It  was  this  dealing  in  permanent  loans  that  embarrassed 
the  bank  when  it  needed  means  in  an  emergeney.  How  could 
any  bank  collect  its  debts  with  any  facility,  when  they  were 
out  for  six,  twelve,  and  eighteen  months  ?  No  bank  could, 
and  the  Bank  of  the  United  States  did  not  in  1831-32.2 
Though  it  managed  to  correct  many  of  the  abuses  after  that 
date,  the  difficulties  entailed  by  western  banking  remained  to 
the  end.  The  state  of  the  Louisville  branch  in  1834  was  no 
better  than  in  1832,  three-fourths  of  its  debts  being  practi- 
cally permanent.3  When  the  bank  closed  many  of  its  offices 

i  "  The  whole  amount  of  domestic  bills  under  discount  in  the  valley  of  the  Mis- 
sissippi, in  November  last,  as  shown  by  the  monthly  statements  at  the  close  of  that 
month,  was  $10,112,106.37.  Upon  the  supposition  that  it  is  all  in  the  same  condition 
as  the  bill  debt  at  Nashville,  at  least  seven  out  of  the  ten  millions  is  secured  by  paper 
called  race-horse  bills,  which  is  running  from  branch  to  branch,  waiting  for  crops  to 
be  raised  to  meet  them,  and  ruining  the  drawers  with  interest,  exchange,  commis- 
sions for  endorsement  and  acceptance,  and  other  expenses." — H,  R.  121,  22d  Cong.,  2d 
Sess.,  p.  49. 

2Benton,  Jackson,  and  their  associates  declared  that  the  bank  had  first 
expanded  with  a  political  purpose  and  then  contracted  with  the  same  purpose. 
Thus  in  Benton's  speech  of  July  12, 1832,  he  said :  "  Her  reasons  then  assigned  for 
curtailing  at  the  western  branches,  were  false,  infamously  false,  ....  the  true 
reasons  were  political :  a  foretaste  and  prelude  to  what  is  now  threatened."  This, 
after  showing  that  the  bank  had  expanded  its  business  $5,000,000  since  the  year 
opened.  "  The  debt  had  been  created  for  the  very  purpose  to  which  it  was  now 
applied ;  an  electioneering,  political  purpose."  The  contraction  was  a  contrivance 
to  press  the  debtors.  "  Every  where  ....  in  the  West,  the  screw  was  turned  far 
enough  to  make  the  screams  of  the  victims  reach  their  representatives  in  Congress," 
and  so  on  ad  nauseam. — Thirty  Years,  Vol.  I,  p.  258.  These  charges  vanish  before 
the  presentation  of  the  facts.  The  bank  was  not  attempting  to  create  distress  in 
order  to  secure  a  renewed  charter.  This  the  bank  could  not  have  done  even  had  it 
wished.  It  was  swayed  by  forces  greater  than  itself.  It  had  no  power  to  extend  its 
accommodations  to  as  great  an  extent  as  was  demanded ;  indeed,  it  wished  to  keep 
them  down,  but  could  not.  Consequently  the  expansion  cannot  be  charged  to  politi- 
cal schemes.  In  the  next  place,  the  bank  was  compelled  to  attempt  curtailment  by 
the  action  of  the  government  in  paying  off  the  national  debt.  Consequently  the 
troubles  of  debtors  thus  caused  were  not  to  be  charged  to  participation  in  politics 
any  more  than  the  previous  expansion. 

8  "This  office  then  [Nov.  1, 1833]  held  three  classes  of  discounted  paper. 

"1st.  Notes  payable  at  maturity. 

"  2d.  Notes  on  which  ten  per  cent,  was  required  to  be  paid  at  each  renewal ;  and, 

"3d.  Notes  renewable,  on  which  no  calls  heretofore  have  been  made. 

"The  first  class  of  those  notes  was  all  paid  in  the  months  of  November  and 
December  last,  .... 

"  The  second  class  of  notes  on  which  ten  per  cent,  is  paid  at  each  renewal, 


KESULTS  OF  BIDDLE'S  SYSTEM  101 

in  1835  and  1836,  it  protested  at  one  branch  alone  $405,- 
280.87,  all  in  bills  of  domestic  exchange.1  Other  losses 
must  have  been  concealed  by  the  methods  of  selling  the  debts 
to  other  banks  for  long  credits.  Renewals  remained  com- 
mon.2 It  must  be  concluded,  therefore,  that  the  later  busi- 
ness of  the  institution  in  the  West  was  not  conservative  and 
sound.  But  this  must  not  be  charged  to  the  bills  of 
exchange.  The  same  losses  would  undoubtedly  have  fol- 
lowed on  discounted  notes.  From  the  letters  already  quoted 
it  is  plain  that  the  discounted  notes  of  the  offices  had  to  be 
renewed,  the  renewal  generally  being  by  turning  these  notes 
into  bills  of  exchange.  The  same  facts  as  to  the  renewing 
of  notes  come  out  in  the  report  of  the  Louisville  office 
already  referred  to.  The  loans  here  were  in  every  case  notes 
discounted,  and  yet  the  major  part  was  permanent.  It  was 
not,  then,  the  form  of  accommodation  which  involved  loss ; 
it  was  the  granting  of  accommodations  at  all  to  so  large  an 
extent.  This  was  rendered  possible,  and  indeed  made 
inevitable,  by  Biddle's  plans  for  employing  the  capital  of  the 
bank  in  the  West  and  Southwest ;  and  his  system,  therefore, 
must  be  held  responsible. 

amounts  to  this  time  to  about  $1,100,000.  This  class  of  debts,  although  considered 
ultimately  very  good,  is  generally  due  by  a  description  of  debtors  that  cannot  well 
bear  any  great  curtailment ;  and  an  attempt  to  force  payments  beyond  this  rate 
would,  I  fear,  greatly  increase  our  list  of  suspended  debts. 

"  The  third  class  of  notes  amounts  to  about  the  sum  of  $600,000,  renewable  at 
different  periods,  from  sixty  days  to  six  months.  This  description  of  notes  was  gen- 
erally taken  for  old  compromised  debts,  real  estate  sold,  &c.,  and  is  well  secured  to 
the  bank,  either  by  mortgage  or  personal  security ;  but  although  considered  very 
good,  yet  it  would  be  difficult  to  force  heavy  curtailments  on  this  class  of  our 
debtors."— Feb.  4, 1834,  S.  D.  17,  23d  Cong.,  2d  Sess.,  p.  110.  The  amount  of  discounted 
notes  in  Oct.,  1833,  had  been  $2,343,000.  They  were  at  their  highest  in  that  month. 
According  to  the  president's  letter,  then,  the  amount  of  really  good  paper  in  local 
notes  must  have  run  from  $800,000  to  $700,000  and  $800,000,  while  the  rest  of  the 
$2,400,000  was  in  the  shape  of  permanent  loans.  The  figures  for  1834  show  that  dis- 
counts never  fell  below  $1,780,000. 

1  Ex.  Doc.  118,  24th  Cong.,  2d  Sess.,  p.  43.    "  The  second  item  consists  of  domestic 
bills,  ....  Of  these  you  were  already  informed  that  $405,280.87  were  under  protest  at 
a  single  "branch."— /6td.,  p.  48,  bank  committee's  statement. 

2  The  committee  speaks  of  "  direct  renewals  of  bills  "  and  "  the  discount  of  new 
bills  to  enable  the  parties  to  take  them  up." — Ibid.,  p.  48. 


162  THE  SECOND  BANK  OF  THE  UNITED  STATES 

The  board  of  directors  at  Philadelphia  seems  to  have  been 
unaware  of  the  nature  of  the  business  done,1  but  the  execu- 
tive officers  soon  awoke  to  a  realizing  sense  of  the  situation. 
The  first  intimation  of  this  occurs  in  a  letter  from  Biddle  to 
Jaudon  in  April:  "I  have  rarely  been  so  much  surprized 
and  startled  as  at  the  appearance  of  your  two  last  weekly 
statements  representing  such  an  extension  of  discounts  of 
domestic  bills  widely  scattered."  He  adds  that  this  is  in 
direct  conflict  with  the  plan  of  operations  to  be  pursued,  and 
directs  Jaudon  to  reduce  at  once.2  Cashier  Mcllvaine  was 
more  positive  that  the  New  Orleans  bill  business  was  wrong. 
"More  than  two-thirds  of  the  domestic  bills  purchased," 
he  wrote,  "are  at  60  days  upon  the  Northern  Cities — 
and  a  large  portion  of  them  must  'come  up  by  the 
roots.'"3  In  July,  as  already  noted,  the  bank  prohibited 
the  purchase  of  all  bills  at  the  western  and  southwestern 
offices,  "  except  when  it  may  be  necessary  to  secure  a  debt 
already  due  to  the  bank  or  the  offices."  In  sending  these 
orders  Biddle  bluntly  and  truthfully  asserted  that  these 
bills  are  "in  fact  a  mere  advance  by  the  Bank  and  the 
Atlantic  offices."  *  He  had  had  this  truth  thoroughly  brought 
home  to  him  by  his  experience  since  October,  1831,  and  he 
never  forgot  it.  In  November  he  again  peremptorily  bids 
the  president  at  Nashville  to  "abstain  from  the  purchase  of 
domestic  bills,  except  in  reduction  of  pre-existing  debts  to 
the  bank,"5  and  in  1834,  after  getting  rid  of  most  of  the 
bills  by  the  contraction  of  that  year,  he  shuns  their  renewal, 
writing  in  relation  to  the  desire  of  the  Pittsburg  office  to 
begin  purchases  once  more:  "Unfortunately  these  bills  are 
mainly  in  the  crop  exchanges  of  the  western  cities  and  I 

i  H.  R.  121,  22d  Cong.,  2d  Sess.,  pp.  58,  77,  89.  2  P.  L.  B.,  Vol.  IV,  p.  256. 

3To  Biddle,  June  1, 1832,  J5.  P. 

*To  Hermau  Cope,  of  Cincinnati,  July  30, 1832,  P.  L.  B.,  Vol.  IV,  p.  273. 
5  Nov.  10, 1832,  H.  R.  121,  22d  Cong.,  2d  Sess.,  p.  46. 


KESULTS  OP  BIDDLE'S  SYSTEM  163 

feel  a  little  afraid  of  reviving  them.  I  should  prefer,  if 
any  thing  were  necessary,  an  increase  of  its  bills  on  Phila- 
delphia, but  as  these  are  very  often  made  paper — they 
might  not  be  as  good  as  a  direct  increase  of  the  local 
loans."1  He  had  had  "enough  —  and  more  than  enough" 
of  "banking  in  the  interior." 

iTo  Jaudon,  Newport,  July  16, 1834,  B.  P. 


CHAPTER   VIII 
THE  BANK  AND  THE  DEMOCRACY 

THE  opinion  prevailed  in  1829  that  the  bank  was  almost 
impregnable  in  popular  favor,  a  conviction  which  was  not 
confined  to  its  friends  but  found  voice  in  the  expressed  fear 
of  its  enemies.  How  mistaken  it  was  the  consideration  of 
the  influences  at  work  against  the  continuance  of  the  bank 
will  reveal.  These  influences  may  all  be  reduced  to  five 
heads:  the  widespread  belief  that  the  bank  was  unconsti- 
tutional, the  hostility  of  the  states,  the  opposition  of  state 
banks,  the  rise  of  the  Democracy,  and  the  envy  and  hatred 
which  the  poor  always  feel  for  the  rich. 

Sumner  considers  the  constitutional  question  as  having 
no  vitality  when  Jackson's  first  message  was  delivered,1  and 
it  must  be  conceded  that  it  had  less  vitality  at  this  moment 
than  ever  before.  Nevertheless,  the  belief  in  the  bank's 
unconstitutionality  was  still  vigorous,  and  was  extremely 
prevalent  in  Virginia,  Georgia,  Ohio,  Kentucky,  Tennes- 
see, and  South  Carolina,  and  only  less  so  in  the  other 
southern  and  western  states.  Though  it  had  been  quiescent 
for  years,  the  discussion  of  the  constitutional  question  was 
certain  to  arise  as  soon  as  the  proposition  to  re-charter  was 
broached. 

The  undying  hostility  of  the  states,  which  believed  their 
rights  infringed  and  feared  the  centralizing  tendencies  of  the 
bank,  was  intimately  connected  with  the  constitutional  ques- 
tion. In  South  Carolina  and  Georgia  the  "states-rights" 
party  opposed  the  bank  almost  exclusively  for  the  latter 

1  SUMNER,  Jackson  (revised  edition),  p.  283.  As  one  fact  to  the  contrary  it  may 
be  stated  that  resolutions  against  the  bank's  constitutionality  were  introduced  in 
the  South  Carolina  legislature  in  1828. 

164 


THE  BANK  AND  THE  DEMOCRACY  165 

reason,  though  they  were  also  influenced  by  the  conviction 
that  it  was  injurious  to  the  material  welfare  of  the  state.1 
In  the  West  similar  objections  were  offered;  in  Kentucky 
the  struggle  over  the  "relief  system"  involved  the  bank 
and  made  it  very  unpopular;  in  1825  Governor  Desha,  of 
that  state,  bitterly  denounced  it  in  his  annual  message;  in 
Tennessee  the  state  law  imposing  a  tax  upon  any  branch 
established  there  was  not  repealed  until  1827 ;  in  Ohio  the 
commonwealth  persisted  in  opposition  until  1824;  in  Ala- 
bama the  governor  and  legislature  protested  against  the 
establishment  of  a  branch  in  1827;  in  Connecticut  an 
attempt  was  made  in  1829  to  tax  the  stock  held  by  its 
citizens;2  and  in  1830  South  Carolina  imposed  a  tax  of  1 
per  cent,  upon  the  dividends  of  stockholders  resident  in 
that  state.8  In  New  York,  state  pride  was  offended  because 
Philadelphia  and  not  New  York  city  was  the  location  of 
the  bank;  while  of  still  deadlier  import  was  the  struggle 
for  commercial  supremacy  between  the  two  cities,  to  secure 
which  the  bank  was  of  great  importance.  The  situation 
was  further  complicated  by  the  political  rivalry  between 
the  two  states.  In  the  scramble  for  national  honors  Penn- 
sylvania politicians  were  forced  to  support,  New  York 
politicians  to  oppose,  the  bank.  It  was  of  fatal  import  to 
the  institution  that  at  this  juncture  the  Democracy  of  New 
York  was  headed  by  Martin  Van  Buren,  the  acutest  politi- 
cian of  his  day  and  an  enemy  of  the  bank.*  The  hostility 

i "  The  truth  was  not  to  be  concealed,  that  in  all  those  States  in  which  the 
income  of  the  Government  vastly  exceeds  its  local  expenditures,  the  operation  of 
the  Bank  of  the  United  States  is  felt  with  more  or  less  severity  and  inconvenience." 
Such  was  the  case  in  South  Carolina,  and  the  bank  was  therefore  unpopular  there. — 
HAMILTON,  of  South  Carolina,  Dec.  21, 1827,  C.  D.,  Vol.  IV,  Part  I,  p.  853. 

2ff.  R.,  460,  2'2d  Cong.,  1st  Sess.,  pp.  290-92. 

3  NILES,  Vol.  XXXIX,  p.  460.  Imposed  in  Dec.,  1830,  and  declared  by  the  state 
court  of  appeals  not  unconstitutional.— State  ex  rel.  Berney  vs.  Collector,  2  BAILEY, 
654  (South  Carolina  Reports) . 

*  In  1826  Van  Buren  declared  against  the  bank. — Benton's  letter  to  the  Mississippi 
state  convention,  Dec.  16, 1834,  Extra  Globe,  Vol.  I,  p.  402.  In  1829  his  message  as  gov- 
ernor contained  a  phrase  which  evidenced  dislike  of  all  national  monopolies.  Van 


166  THE  SECOND  BANK  OP  THE  UNITED  STATES 

of  the  states  as  a  whole,  however,  was  less  pronounced  in 
1829  than  at  any  other  period  of  the  bank's  existence. 

The  opposition  of  state  banks  whose  interests  were 
involved  arrayed  a  powerful  party  against  the  bank.  It 
had  forced  many  of  them  to  restrict  their  business  by  com- 
pelling payment  for  their  notes  in  specie,  and  it  had  been 
particularly  active  and  particularly  offensive  in  this  respect 
in  the  South  and  West.  Consequently  it  could  count  upon 
opposition  from  most  of  these  corporations.  Other  reasons 
were  operative  also,  as  a  review  of  the  situation  in  New 
York  will  show.  Here,  as  elsewhere,  the  bank  reduced  the 
profits  of  the  state  banks,  because  it  loaned  at  6  per  cent., 
being  compelled  to  do  so  by  its  charter,  while  the  New  York 
banks,  which  might  legally  have  charged  7  per  cent.,  were 
compelled  to  loan  at  the  lower  rate  because  the  big  bank  did 
so;  another  reason  for  hostility  was  found  in  the  safety- 
fund  system  which  bound  the  politicians  and  the  bankers  in 
a  common  union.  The  politicians  expected  to  control  the 
New  York  banks  through  this  system,  but  could  not  reach 
the  Bank  of  the  United  States;  while  the  bankers  felt  that 
they  were  subjected  to  restraints  not  imposed  upon  the 
national  bank,  and  cherished  the  dislike  which  the  members 
of  one  system  are  apt  to  feel  for  those  under  another  and 
unfriendly  system.1  These  remarks  relative  to  New  York 
will  show  how  the  conflict  of  interests  was  likely  to  be  united 
with  the  opposition  of  politicians.  Yet  it  is  true  that,  as  in 
the  case  of  constitutional  objections  and  state  opposition, 
the  local  institutions  were  distinctly  more  friendly  to  the 

Bnren  opposed  the  bank  on  other  than  constitutional  grounds :  " '  Van  Buren,  you 
are  against  the  bank  on  the  ground  of  its  unconstitutionally.'  He  said,  '  Oh  I  no,  I 
believe  with  Mr.  Madison  that  the  contemporaneous  recognition  of  the  constitutional 
power  to  establish  a  bank  by  all  the  departments  of  the  government,  and  with  the 
concurrence  of  the  people,  has  settled  that  question  in  favor  of  the  power.'  " — Inter- 
view with  Van  Buren,  James  A.  Hamilton,  in  a  letter  to  a  friend,  Nov.  28, 1829, 
Reminiscences,  p.  150. 

1  The  center  of  the  union  of  state  politicians  and  banks  was  the  Farmers  and 
Mechanics'  Bank  at  Albany. 


THE  BANK  AND  THE  DEMOCRACY      167 

national  bank  in  1829  than  at  any  other  time.  Many  of 
them  petitioned  that  it  might  be  re-chartered. 

Democracy,  devoted  to  the  principle  of  equality,  is 
opposed  to  all  forms  of  privilege,  and  to  none  more  than  to 
a  monetary  monopoly.  When  it  is  recollected  that  the  Bank 
of  the  United  States  was  at  that  time  the  one  great  monopoly 
in  the  country,  and  that  against  it  were  directed  all  the  pas- 
sionate opposition  and  fear  which  today  fall  upon  banks, 
railroad  companies,  and  trusts,  its  danger  from  the  rising 
power  of  that  fierce  Democracy  which  with  Andrew  Jackson 
swept  over  the  country  may  be  faintly  measured.  The 
Democracy  was  positive  that  the  bank  was  a  menace  to  the 
political  and  social  interests  of  the  United  States;  that  it 
made  "the  rich  richer  and  the  poor  poorer;"  that  it 
depressed  the  weak  and  made  "the  potent  more  powerful;" 
that  it  accentuated  the  differences  of  society,  creating  on 
the  one  hand  a  powerful  aristocracy  and  on  the  other  hand 
an  impotent  and  beggarly  proletariat.  These  opinions 
were  especially  prevalent  in  the  West,  where  Democracy 
was  most  powerful.  While  the  other  factors  in  the  deter- 
mination of  the  bank's  fate  had  been  diminishing  in  potency, 
this  had  increased  with  every  year  since  the  granting  of  the 
charter. 

Inextricably  linked  with  the  Democratic  opposition  was 
the  ceaseless  hostility  between  rich  and  poor,  the  envy  and 
hatred  of  the  man  who  has  nothing  for  the  man  who  has 
much,  the  ill-will  which  the  debtor  eternally  cherishes  for 
the  creditor;  all  the  social  arguments  directed  against  the 
bank  gathered  force  and  passion  from  this  feeling  and  at 
the  same  time  added  to  it. 

These  were  the  forces  which  worked  toward  the  destruc- 
tion of  the  bank.  What  were  the  conserving  forces  ?  For 
the  most  part  persons  interested  in  the  bank  and  conscious 
that  they  were  so :  its  employees,  its  debtors,  its  stockhold- 


168  THE  SECOND  BANK  OP  THE  UNITED  STATES 

ers ;  enlightened  business-men  who  understood  the  value  of 
the  bank ;  statesmen  of  the  nationalizing  school,  who  would 
uphold  the  bank  because  they  believed  it  to  be  in  accord- 
ance with  the  political  principles  they  professed ;  and  finally 
a  motley  crowd  of  noisy  politicians  and  newspaper  men. 
These  factors  of  strength  could  not  be  very  important.  The 
employees  could  have  no  weight  in  politics ;  the  debtors  were 
only  a  few  thousands ;  politicians  would  inevitably  follow  the 
majority;  the  statesmen  would  be  compelled  to  yield  prin- 
ciple to  expediency;  while  the  enlightened  business  men 
would  be  of  more  injury  than  assistance  to  any  cause  they 
supported,  for  they  belonged  to  that  intelligent  class  whose 
influence  upon  American  affairs  has  always  been  inconsider- 
able, partly  because  they  are  not  interested  in  politics,  partly 
because  they  are  themselves  objects  of  suspicion  to  the 
democratic  masses.  There  remained  the  stockholders.  The 
distribution  of  the  stock  was  consequently  of  some  moment 
in  determining  the  strength  of  the  bank.  In  July,  1831, 
there  were  4,145  stockholders,  of  whom  466  were  foreign- 
ers.1 This  small  number  of  people,  and  mostly  people  who 
took  little  or  no  interest  in  politics,  could  give  the  bank  no 
popular  strength,  and  the  dreadful  fact  that  foreigners  held 
stock,  and  that  among  these  were  English  lords  and  ladies, 
was  a  source  of  positive  weakness  to  it.  Add  to  this  that 
the  bulk  of  the  domestic  stock  was  localized  in  the  states  of 
Massachusetts,  Pennsylvania,  New  York,  Maryland,  Virginia, 
and  South  Carolina,  and  it  is  plain  that  the  bank  could 
derive  little  assistance  from  the  distribution  of  its  stock. 

Any  additional  support  of  the  bank  would  spring  from 
the  realization  of  its  usefulness  to  the  general  public  :  its 
services  in  supplying  a  sound  currency,  in  managing  the 
business  of  the  treasury  efficiently  and  cheaply,  and  in 
furnishing  banking  accommodations  at  a  reasonable  rate. 

i  NILES,  Vol.  XLI,  p.  112.    For  the  distribution  of  the  stock  see  Appendix  IX. 


THE  BANK  AND  THE  DEMOCRACY  169 

But  these  were  virtues  hidden  from  the  vulgar  and  could 
never  be  made  apparent  to  them  because  of  the  abstruseness 
and  involved  nature  of  financial  discussions.  The  bank's 
hold  on  popular  favor  was  consequently  of  the  most  tenuous 
kind;  as  Webster  said,  popular  prejudice  once  aroused  was 
"more  than  a  match  for  ten  banks;"  and  it  was  certain  that 
in  a  conflict  with  a  popular  president  the  bank  had  not  the 
faintest  hope  of  success.  That  it  failed  to  realize  this  was 
its  error  and  its  misfortune. 

The  beginning  of  the  bank  struggle  may  be  dated  from 
December  13, 1827,  on  which  day  P.  P.  Barbour,  of  Virginia, 
introduced  in  the  House  of  Representatives  a  resolution 
directing  the  sale  of  the  bank  stock  owned  by  the  govern- 
ment.1 It  was  suspected  that  this  movement  portended  "the 
beginning  of  an  attack"  which  would  "lead  to  permanent 
distrust  in  the  stability  of  the  institution,"2  and  the  price  of 
the  stock  immediately  fell.  It  was  also  believed  that  the  act 
indicated  the  hostility  of  Jackson  politicians  to  the  bank.3 
The  motion  to  adopt  the  resolution  was  lost  by  the  over- 
whelming vote  of  174  to  9,4  a  result  which  caused  the  stock 
to  recover  its  standing  in  the  market  and  convinced  many 
that  the  bank  would  be  re-chartered.5 

*  C.  D.,  Vol.  IV,  Part  I,  p.  815. 

2  John  Sergeant  to  Nicholas  Biddle,  Dec.  13, 1827,  B.  P. ;  Gorham's  remarks,  Dec. 
21, 1827,  C.  D.,  Vol.  IV,  Part  I,  p.  843.  The  intention  was  disavowed  by  Barbour. 

3 Hamilton,  of  South  Carolina,  said  that  "many  an  old  fundholder  "  would 
"exclaim  —  there,  you  see  how  it  is  the  moment  these  Jackson  men  have  got  posses- 
sion of  the  House ;  away  goes  the  Bank  of  the  United  States  '  sky-high,'  and  we  shall 
next  see  the  '  military  chieftain,'  after  his  election,  making  his  way,  sword  in  hand, 
into  the  vaults  of  the  Bank,  and  seizing  its  coffers  as  his  especial  portion  of  the  booty 
after  the  strife  and  victory.  Be  quiet,  gentlemen.  Be  assured  we  do  not  mean  to 
run  our  heads  against  the  Bank  of  the  United  States  —  and  this  our  vote  will  show." 
—Ibid.,  p.  854.  A  great  many  people  later  would  believe  that  there  was  more  truth 
than  humor  in  this  description  of  what  Jackson  would  do. 

*76td.,  p.  858. 

5  Some  believed  that  the  vote  was  "  conclusive  in  favor  of  a  renewal  of  the  charter 
of  the  bank."—  NILES,  Vol.  XXXIII,  p.  275.  Barbour's  motion  occasioned  Rush's 
very  favorable  notice  of  the  bank  in  the  report  of  1828.  "  At  the  time  the  Bank  was 
attacked  last  winter,  for  so  it  was  in  effect,  I  took  my  determination  not  to  leave  the 
Department  without  placing  upon  record  my  testimony  of  its  vast  value  to  the 
nation."— Rush  to  Biddle,  Dec.  10, 1828,  B.  P. 


170  THE  SECOND  BANK  OP  THE  UNITED  STATES 

The  next  attack  was  made  incidentally  by  Senator  Ben- 
ton  in  February,  1828,  in  a  series  of  resolutions  relative  to 
the  sinking  fund.  Though  there  was  no  direct  reference  to 
the  bank  in  the  resolutions,  yet  the  senator's  speech  in  sup- 
port of  them  reveals  a  purpose  to  attack  it  as  an  institution 
enjoying  undemocratic  privileges  at  the  expense  of  the  people ; 
for  he  constantly  refers  to  the  balances  of  public  money 
in  the  bank  as  "  the  gratuitous  deposites,"  and  the  whole  pur- 
pose of  his  resolutions  was  to  reduce  these  deposits.1  In 
December,  1828,  Benton  pertinaciously  resumed  the  aggres- 
sive in  a  series  of  resolutions,  one  of  which  declared  that  the 
Bank  of  the  United  States  "  ought  to  be  required  to  make  a 
compensation  ....  for  the  use  of  the  balances  of  public 
money  on  its  hands."2  On  the  6th  of  January  he  spoke  to 
his  resolutions,  devoting  considerable  attention  to  the  sums 
of  public  money  in  the  keeping  of  the  bank  and  advancing 
the  astonishing  argument  that  the  provision  in  the  charter 
which  permitted  the  secretary  of  the  treasury  to  remove  the 
deposits  "  included  the  right  to  make  terms  for  letting  them 
remain."3  This  was  far  from  being  the  opinion  of  the  Com- 
mittee on  Finance,  which  reported  on  the  20th  of  February, 
controverting  Benton's  arguments  and  asserting  that  the 
bonus  had  been  paid  in  consideration  of  the  privilege  of 
holding  the  deposits.4  But  Benton's  attack  upon  the  privi- 
leges of  the  bank  had  its  effect  upon  popular  opinion,  and 
later  he  asserted  that  the  attempt  to  secure  compensation  for 
the  balances  was  the  actual  beginning  of  the  struggle  with 
the  bank.5 

i  C.  D.,  Vol.  IV,  Part  I,  p.  379. 

^Senate  Jvurnal,  20th  Cong.,  2d  Sess.,  p.  48,  Dec.  23.  Benton's  hostility  did  not 
escape  the  bank.  "  You  will  see  from  the  papers,"  wrote  Senator  Samuel  Smith  to 
Biddle,  "that  Colonel  Benton  has  renewed  his  attack  on  the  Bank." — Dec.  27, 1828, 
B.P. 

3  C.  D.,  Vol.  V,  p.  19.  *S.  D.  92,  20th  Cong.,  2d  Sess.,  pp.  4,  5. 

5  "  Mr.  President,  it  does  seem  to  me  that  there  is  something  ominous  to  the 
bank  in  this  contest  for  compensation  on  the  undrawn  balances.  It  is  the  very  way 
in  which  the  struggle  began  in  the  British  Parliament  which  has  ended  in  the  over- 


THE  BANK  AND  THE  DEMOCRACY      171 

The  next  act  of  opposition  grew  out  of  circumstances 
attending  the  election  of  Jackson  in  1828.  Complaints  were 
made  that  the  branches  at  Lexington,  Charleston,  Portsmouth, 
and  New  Orleans  had  attempted  to  secure  Jackson's  defeat. 
At  this  time  Amos  Kendall,  who  was  just  beginning  to 
assert  his  dominance  of  Jackson's  political  thinking,  Isaac 
Hill,  a  pettifogging  politician  and  newspaper  editor  of 
New  Hampshire,  and  Francis  P.  Blair,  of  Kentucky,  an 
editor  who  had  borrowed  from  the  bank  and  had  apparently 
settled  his  account  at  a  loss  to  the  institution,1  were  the 
principal  authors  of  these  charges.  Kendall  and  Blair 
were  infected  with  the  monetary  heresies  which  then  raged 
in  Kentucky,  and  both  believed  that  the  bank  had  partici- 
pated in  campaigns  for  the  purpose  of  overthrowing  the 
"  old  court "  party.  The  complaints  against  the  Kentucky 
branches  were  communicated  to  Biddle  as  early  as  January, 
1829,  coming  from  the  Democratic  congressmen  of  that  state 
through  Postmaster  McLean,  who  suggested  the  selection 
of  directors  "from  both  political  parties."  He  also  fur- 
nished from  Colonel  R.  M.  Johnson  a  list  of  members  of  the 
Jackson  party  in  Kentucky  who  were  considered  eligible 
and  fit  for  such  positions.2  Biddle,  in  reply,  repelled  the 
insinuation  that  the  bank's  appointments  were  dictated  by 
political  considerations,  and  repudiated  the  suggestion  of  "a 
system  of  political  balance"  as  resulting  in  " almost  inevi- 
tably" forcing  upon  the  bank  "incompetent  or  inferior 
persons." '  He  then  forwarded  the  charges  to  the  Kentucky 

throw  of  the  Bank  of  England.  It  is  the  way  in  which  the  struggle  is  beginning 
here.  My  resolutions  of  two  and  three  years  ago  are  the  causes  of  the  speech  which 
you  now  hear;  ....  the  question  of  compensation  for  balances  is  now  mixing  itself 
up  here,  as  in  England,  with  the  question  of  renewing  the  charter." — Feb.  2, 1831, 
Thirty  Years,  Vol.  I,  p.  196. 

i Leslie  Coombs  to  Biddle,  Lexington,  July  21, 1831,  B.  P.  "I  have  sent  to  Mr. 
Clayton  the  account  of  Mr.  Blair  which  ought  to  accompany  those  of  the  other  edi- 
tors."—Biddle  to  John  Watmough,  April  23, 1832,  P.  L.  B.,  Vol.  IV,  p.  220.  It  appears 
that  Blair  owed  the  bank  $20,744  and  settled  by  paying  $2,237.—  NILES,  Vol.  XLV,  p.  39, 
quoting  J.  G.  BENNETT  ;  and  see  MACKENZIE'S  Lives  of  Butler  and  Hoyt,  pp.  87,  88. 

2  John  McLean  to  Biddle,  Jan.  5, 1829,  B.  P. 

»  Biddle  to  McLean,  Jan.  11, 1829,  ibid. 


172  THE  SECOND  BANK  OF  THE  UNITED  STATES 

branches,  with  a  request  for  information  and  a  warning  to 
avoid  all  political  action.1  The  officers  of  the  branches 
replied,  denying  the  charges  and  demonstrating  to  Biddle's 
satisfaction  that  the  nominations  made  by  the  congressmen 
were  unfit  and  designed  to  transform  the  offices  into  politi- 
cal machines,2  while  the  cashier  at  Louisville  declared  that 
there  was  a  scheme  to  make  a  Jackson  partisan  president  of 
that  branch.3  These  explanations  did  not  satisfy  the  plot- 
ters against  the  bank,  who  continued  to  insinuate  charges  to 
Jackson,  filling  his  mind  with  suspicions  to  which  he  gave 
free  expression.4 

Under  these  circumstances  Secretary  Ingham,  of  the  treas- 
ury, was  persuaded  by  Senator  Woodbury  of  New  Hamp- 
shire to  make  complaint  to  Biddle  of  the  noxious  activity 
of  Jeremiah  Mason,  president  of  the  Portsmouth  branch. 
Woodbury  wished  that  Ingham  should  use  his  "influence 
at  the  mother  bank  in  producing  a  change."5  Ingham 
requested  that  the  charges  be  investigated,  intimating  that 
Mason  was  using  his  place  for  political  purposes.6  Two 
weeks  earlier  Biddle  had  received  a  letter  of  a  similar  tenor 7 
from  Woodbury,  and,  almost  simultaneously  with  Ingham's, 
one  written  by  Isaac  Hill  to  two  gentlemen  in  Philadelphia, 
intended  for  his  perusal  and  containing  two  memorials. 
The  first  of  these  was  from  a  number  of  merchants  at  Ports- 
mouth complaining  of  the  business  methods  of  the  branch, 
and  the  second  was  from  the  Jackson  members  of  the  New 
Hampshire  legislature,  uttering  similar  complaints  and  con- 
taining a  list  of  names  for  directors,  four  of  which  were 
those  of  Jackson  men.8  This  cumulative  attack  from  the 

1 S.  D.  17,  23d  Cong.,  2d  Sess.,  pp.  208,  299.  « Ibid.,  pp.  301,  302,  304,  305. 

3  Feb.  12, 1829,  B.  P.  * Ingham's  Exposition,  NILES,  Vol.  XLII,  p.  315. 

5  Woodbury  to  Ingham,  June  27, 1829,  H.  R.  460,  22d  Cong.,  1st  Sess.,  pp.  439, 440. 

6  Ingham  to  Biddle,  July  11, 1829,  ibid.,  pp.  438,  439. 

7  Biddle  to  Ingham,  July  18, 1829,  ibid.,  p.  441. 

8  Isaac  Hill  to  J.  N.  Barker  and  John  Pemberton,  July  17, 1829,  inclosing  memo- 
rials of  June  27  and  June  29,  ibid.,  pp.  472-4. 


THE  BANK  AND  THE  DEMOCRACY  173 

secretary,  the  senator,  the  second  comptroller  of  the  treas- 
ury, the  New  Hampshire  legislature,  and  the  merchants  of 
Portsmouth,  added  to  the  action  in  regard  to  the  Kentucky 
branches  and  the  charges  against  the  branch  at  New  Orleans, 
convinced  the  board  of  directors  that  there  was  an  organ- 
ized attempt  to  convert  the  bank  into  a  Democratic  party 
machine.  The  animus  of  the  attacks  was  revealed,  they 
thought,  in  a  sentence  in  Woodbury's  letter  declaring 
that  Mason  was  "  a  particular  friend  of  Mr.  Webster,  and 
his  political  character  is  doubtless  well  known  to  you,"  and 
another  sentence  in  Hill's  letter  which  asserted  that  "the 
friends  of  General  Jackson  in  New  Hampshire  have  had  but 
too  much  reason  to  complain  of  the  management  of  the 
branch  at  Portsmouth."  The  opinion  of  the  directors  has 
been  adopted  by  most  historians,  who  believe  that  Jackson's 
hostility  is  to  be  dated  from  the  repulse  of  the  attempt. 
This  opinion  has  the  corroborative  weight  of  assertions 
made  by  Daniel  Webster,  John  C.  Calhoun,  and  John 
Quincy  Adams.  It  is,  however,  only  partially  true.  In  so 
far  as  it  involves  Hill  and  Woodbury,  it  may  be  accepted, 
but  the  implication  of  Jackson  and  the  bulk  of  the  party  is 
demonstrably  false.  Ingham  also  disclaimed  any  such  pur- 
pose both  in  his  letters  to  Biddle  in  1829,1  and  again  in 
1832,  asserting  that  he  acted  as  a  friend  in  order  "  to  avert 
the  meditated  destruction  of  the  bank."2  His  disclaimer  is 
strengthened  by  the  fact  that  he  was  ignorant  of  the  action 
of  his  subordinate,  Hill,  who  was  behind  the  whole  affair.3 
Ingham's  letters,  therefore,  as  showing  an  intention  to 

i  "Allow  me  ....  to  assure  you,  that  those  charged  with  the  administration  of 
the  Government,  ....  disclaim  all  desire  to  derive  political  aid  through  the  opera- 
tions of  the  bank."— To  Biddle,  July  11,  1829,  ibid.,  p.  439.  Similar  views  are 
expressed  in  the  letter  of  Oct.  5,  ibid.,  pp.  456-62. 

2NILES,  Vol.  XLII,  p.  315. 

3  "  The  communication  made  to  the  Bank  of  the  United  States  by  Mr.  Isaac  Hill, 
accompanying  two  memorials,  was  wholly  unknown  to  me,  until  I  saw  it  adverted  to 
in  your  letter."— Ingham  to  Biddle,  Oct.  5, 1829,  H.  R.  460,  22d  Cong.,  1st  Sess.,  p.  457. 


174  THE  SECOND  BANK  OP  THE  UNITED  STATES 

make  a  party  machine  out  of  the  bank  on  the  part  of  the 
administration,  or  as  revealing  the  source  of  Jackson's  enmity 
to  it,  may  be  safely  neglected.  On  the  other  hand,  they  prove 
that  Democratic  politicians  believed  that  they  had  ground 
for  complaining  of  the  bank.  The  truth  is  that  the  vast 
majority  of  the  bank's  officers  and  directors  were  drawn 
from  the  ranks  of  the  party  hostile  to  Jackson,  not  because 
the  bank  supported  this  party,  but  because  most  of  the 
business  men  were  unfriendly  to  Jackson,  and  the  officers 
and  directors  had  to  be  selected  from  the  ranks  of  the 
business  men.  Yet  this  result,  so  simple  and  obvious,  natu- 
rally appeared  to  Jackson  and  his  supporters  exceedingly 
hostile.  By  the  Jackson  Democrats  the  opinion  was  firmly 
held  that  the  branch  at  Portsmouth  was  a  political  engine; 
that  Mason,  an  aggressive  and  influential  politician  and  the 
close  personal  friend  of  Webster,  owed  his  appointment  to 
these  circumstances,  and  especially  to  Webster's  influence 1 
— in  which  latter  surmise  they  were  quite  correct2 — and  that 
Mason  then  "  undertook  to  establish  "  the  bank's  "  absolute 
control  over  both  parties." 3  Hill,  in  his  letter  of  July  17, 
1829,  asserted  that  all  now  asked  was  that  it  should  "not 
continue  to  be  an  engine  of  political  oppression  by  any 
party ;"*  while  in  1832  he  declared  that  the  branch  "was 
made  a  party  engine  previous  to  the  last  Presidential  elec- 
tion—  its  directors  were  exclusively  of  one  political  party — 
its  favors  were  dispensed  with  a  view  to  affect  that  election  ; 
and  it  was  the  principal  instrument  to  give,  in  the  choice  of 
electors  of  President  in  1828,  a  small  majority  to  the  party 
in  that  State  which  has  ever  since  been  in  a  minority." ' 

1  Woodbury  to  Ingham,  June  27, 1829,  H.  R.  460,  22d  Cong.,  1st  Sess.,  p.  440 

2  "  The  Portsmouth  office*  which  we  have  this  day  arranged  agreeably  to  your 
recommendation."— Biddle  to  Webster,  Aug.  14, 1828,  P.  L.  B.,  Vol.  II,  p.  410. 

3  Extra  Globe,  Vol.  I,  p.  256,  quoting  a  letter  from  Portsmouth. 
*H.  R.  460,  22d  Cong.,  1st  Sess.,  p.  472. 

5  C.  D.,  Vol.  VIII,  Part  I,  p.  1062,  June  8, 1832. 


THE  BANK  AND  THE  DEMOCKACY      175 

The  Ingham  correspondence  is  of  still  greater  import  as 
revealing  the  attitude  of  the  Jackson  Democracy  toward 
questions  of  privilege  and  monopoly,  and  consequently 
toward  the  bank.  It  shows  that  the  party  from  its  political 
principles  was  necessarily  hostile  to  the  bank,  and  that 
Ingham  believed,  as  did  McLean,  the  Kentucky  congress- 
men, Kendall  and  Hill,  Woodbury,  and  Major  Lewis,  that 
only  "checks  and  counterpoises"  would  provide  "a  just 
equilibrium;"  in  other  words,  that  only  by  having  an  equal 
number  of  directors  from  both  parties  could  the  bank  be 
kept  out  of  politics.  This  was  absurd,  since  the  bank's 
interests  could  only  be  injured  by  adopting  any  such  prin- 
ciple for  the  selection  of  its  directors.  On  the  other  hand, 
it  was  a  great  privileged  monopoly,  and  therefore  justly  obnox- 
ious to  the  democratic  theory  of  equality.  Ingham  pointed 
this  out  by  asserting  that  two  opposing  principles  struggled 
for  control  in  the  management  of  the  bank:  the  democratic, 
which  held  "  that  the  bank  ought  to  exist  exclusively  for 
national  purposes,  and  for  the  common  benefit  of  all,"  and 
the  aristocratic,  which  held  that  it  was  the  "prominent  use  " 
of  the  bank  "  to  strengthen  the  arm  of  wealth,  and  counter- 
poise the  influence  of  extended  suffrage  in  the  disposition  of 
public  affairs." 1  Whatever  may  be  said  about  the  first 
principle,  it  is  manifestly  false  to  assert  that  anyone  sup- 
ported the  second.  The  stockholders  of  the  bank  certainly 
did  not  invest  their  funds  with  the  purpose  of  counterpois- 
ing "  the  influence  of  extended  suffrage  "  or  for  any  other 
political  purpose.  It  was  enough,  however,  that  the  Democ- 
racy believed  that  they  did,  and  that  it  was  correct  in  con- 
sidering the  bank  as  enjoying  exclusive  privileges  in  which 
the  masses  could  not  participate. 

The  political  charges  against  the  bank  were  rendered 
effective  by  the  complaints  of  the  merchants  that  Mason's 

iff.  R.  460,  22d  Cong.,  1st  Sess.,  p.  465. 


176  THE  SECOND  BANK  OP  THE  UNITED  STATES 

course  was  offensive  to  them.1  The  truth  is  that  the  office 
at  Portsmouth  had  been  too  free  with  its  accommodations, 
and  had  consequently  fallen  into  difficulties  during  the  pres- 
sure of  1828.  Hereupon  the  board  had  elected  Jeremiah 
Mason  president,  and  that  gentleman  proceeded  rigorously  to 
cut  off  accommodations  and  collect  the  debts  of  the  branch." 
In  this  he  had  been  eminently  successful.  He  had  reduced 
the  time  of  the  renewal  of  accommodation  loans  from  120  to  60 
days,  and  had  insisted  on  the  payment  of  20  per  cent,  of  the 
notes  before  renewing  them,  instead  of  10  per  cent,  as  pre- 
viously.3 In  pursuing  these  measures  Mason  acted  only  as 
a  business-man,  but  his  acts  were  excessively  irritating  to 
debtors  and  gave  an  opportunity  to  the  politicians. 

Biddle,  whose  apprehensions  had  been  keenly  excited  by 
the  similar  complaints  about  the  Kentucky  offices,  immedi- 
ately replied  to  both  Woodbury  and  Ingham,  repelling  the 
charges,  and,  incited  by  his  suspicions,  wrote  a  second  letter  to 
Ingham  showing  a  spirit  of  uncompromising  hostility  both  to 
what  he  considered  an  attempt  to  involve  the  bank  in  politics, 
and  to  the  "official  lecture,"  which  he  thought  the  secretary 
was  not  justified  in  delivering.*  Ingham  believed  himself 
unjustly  treated  and  retorted  sharply  in  a  letter  which, 
according  to  General  Cadwalader,  revealed  "  the  writhing  of 
the  scotched  snake."  &  In  Biddle's  opinion  it  revealed  far 
more  than  this:  it  announced  relations  between  the  bank 
and  the  administration  which  he  was  not  inclined  to  admit. 
"  The  Secretary  of  the  Treasury  believes,"  said  Biddle,  "  1st. 
That  the  '  relations  between  the  Government  and  the  bank ' 
confer  some  supervision  of  the  choice  of  the  officers  of  the 

1  Memorial  of  June  27,  H.  R.  460,  22d  Cong.,  1st  Sess.,  p.  473. 

2  Biddle  to  Ingham,  July  18, 1829,  ibid.,  p.  442. 

3  Extra  Globe,  Vol.  I,  p.  256,  quoting  a  letter  from  New  Hampshire. 

<Two  letters  of  Biddle  to  Ingham,  July  18, 1829,  H.  R.  460,  22d  Cong.,  1st  Sess., 
pp.  440-46 ;  to  Woodbury,  June  30,  1829,  P.  L.  B.,  Vol.  Ill,  pp.  55,  56. 

5  General  Cadwalader  to  Biddle,  undated,  B.  P.  See  Ingham's  letter  of  July  23, 
H.  R.  460,  22d  Cong.,  1st  Sess.,  pp.  446-8. 


THE  BANK  AND  THE  DEMOCRACY      177 

bank,  ....  2d.  That  there  is  some  '  action  of  the  Govern- 
ment on  the  bank '  not  precisely  explained,  but  in  which  he 
is  the  proper  agent;  and,  finally,  3d.  That  it  is  his  right 
and  his  duty  to  suggest  the  views  of  the  administration  as 
to  the  political  opinions  and  conduct  of  the  officers  of  the 
bank."1  Ingham  had  not  said  as  much  as  this,  but  he 
had  talked  of  suggesting  the  government's  views  as  to  the 
"proper  management"  of  the  bank.  His  letter  certainly 
did  not  tend  to  change  Biddle's  opinion  of  the  motive  behind 
it,  nor  his  desire  to  teach  the  secretary  to  mind  his  own 
business,  and  he  wrote  Cadwalader  outlining  a  reply,  which 
should  be  sent  by  the  latter,  as  it  "  would  come  better  from 
you  and  would  annoy  the  individual  more."  He  was  glad, 
he  said,  that  they  had  withstood  him.2 

Biddle  had  scarcely  dispatched  this  letter  to  Cadwalader 
when  he  was  still  further  confirmed  in  his  conviction  that 
the  real  battle  was  with  the  administration  for  the  bank's 
integrity,  by  the  receipt  of  a  letter  from  Mason  stating  that 
at  Hill's  instigation  an  attempt  was  being  made  to  remove 
the  pension  funds  of  the  government  from  the  Portsmouth 
branch  to  a  state  bank  in  Concord,  of  which  Hill  had  for- 
merly been  president.3  Immediately  afterward  the  secre- 
tary of  war  ordered  the  removal  of  the  funds  to  the  Concord 
bank.4  "  It  requires  little  prescience,"  wrote  Cadwalader, 
"to  see  in  these  disgusting  developments  the  germ  of  a 
course  of  systematic  hostility  against  the  Bank.  In  the 
hands  of  impartial  and  independent  men  the  institution  is 
not  what  they  wish  to  make  it  —  an  engine  of  subserviency 
to  their  political  objects." 5  Nor  was  this  the  only  added  com- 
plication. Secretary  Ingham  objected  to  paying  the  com- 

1  Biddle  to  Ingham,  Sept.  15, 1829,  i bid.,  p.  452. 

2  From  Utica,  July  27, 1829,  B.  P. 

3  Mason  to  Biddle,  July  31, 1829,  H.  B.  460,  22d  Cong.,  1st  Sess.,  p.  475. 

*  Aug.  3,  ibid.,  pp.  476,  477.    The  bank  withstood  the  attempt  and  it  failed. 
6  To  Biddle,  Aug.  4, 1829,  B.  P. 


178  THE  SECOND  BANK  OP  THE  UNITED  STATES 

mission  charged  by  the  bank  for  transferring  government 
funds  abroad,  asserted  that  he  could  procure  the  service 
elsewhere  at  a  cheaper  rate,  and  threatened  to  place  part  of 
the  public  deposits  with  a  state  bank,  which  would  oblige 
the  administration  by  making  the  transfers  for  1  per  cent, 
commission  instead  of  for  3^.! 

Ingham  was  now  thoroughly  exasperated,  Biddle  only  less 
so:  "If  we  must  fight,"  exclaimed  the  latter,  "I  want  no 
fairer  battle  ground."  a  After  investigating  the  Portsmouth 
affair,  he  wrote  to  Cadwalader:  "I  can  now  say  with  the 
utmost  confidence  that  the  whole  is  a  party  intrigue  got  up 
by  a  combination  of  small  bankrupts  and  smaller  Dema- 
gogues." 3  The  business  opposition  to  Mason  melted  com- 
pletely away  in  the  face  of  investigation.*  Indignant  at  the 
attempts  which  he  believed  were  being  made  upon  the 
bank's  independence,  Biddle  returned  to  Philadelphia  and 
wrote  a  withering  reply  to  Ingham,  in  which  he  took  the 
liberty  of  inferring  the  three  points  already  noted  as  involved 
in  Ingham's  earlier  letter.5  This  action  was  "altogether 
unexpected"  by  the  guileless  secretary,  and  "created  a 
strong  impression ; "  in  fact,  he  was  deeply  incensed  that 
these  meanings  should  have  been  read  into  his  letter,  and 
indignantly  repudiated  them,  at  the  same  time  asserting  that 
the  administration  did  have  power  over  the  bank  by  its 
authority  to  appoint  five  directors  and  the  secretary's  right 
to  remove  the  government  deposits.8  The  whole  letter, 
along  with  Asbury  Dickins's  comments  to  Biddle  on  his 

1  Cadwalader  to  Biddle,  Aug.  10, 1829,  B.  P. 

2  To  Cadwalader,  Albany,  Aug.  16, 1829,  ibid. 

3  Biddle  to  Cadwalader,  Aug.  28, 1829,  ibid. 

*  The  complainants  were  asked  to  meet  Biddle  at  the  branch.  "  They  came ;  and 
some  sa-id  that  they  had  signed  the  petition  because  they  had  been  asked  to  do  so ; 
some  said  that  they  had  no  knowledge  of  the  subject ;  and  others  said  that  they  had 
signed  it  because  of  the  difficulties  they  found  of  getting  discounts."— WEBSTEE  in 
the  Senate,  Feb.  20, 1838,  Congressional  Globe,25th  Cong.,  2d  Sess.,  p.  192. 

5  Biddle  to  Ingham,  Sept.  15, 1829,  H.  R.  460, 22d  Cong.,  1st  Sess.,  pp.  450-56. 

> Ingham  to  Biddle,  Oct.  5, 1829,  ibid.,  pp.  460  and  462. 


THE  BANK  AND  THE  DEMOCRACY      179 

letter  of  the  15th  of  September,1  leaves  no  doubt  that  the  sec- 
retary was  much  more  ingenuous  in  his  correspondence  than 
Biddle  and  most  historians  have  supposed.  Dickins's  regret- 
ful warnings  and  pleadings  for  conciliation  convinced  Biddle 
that  he  had  possibly  misjudged  the  secretary,  and  in  answer 
to  Ingham's  letter,  spun  out  to  a  prodigious  length  and  full 
of  the  sputterings  of  inappeasable  and  helpless  wrath,  he 
returned  a  good-tempered  reply  closing  the  correspondence.2 
"  You  shall  not  complain  of  me  now,"  he  wrote  to  Dickins, 
"  for  I  have  written  as  conciliatory  as  possible  an  answer  to 
the  voluminous  and  belligerent  epistle  of  your  chief." 8  It 
is  evident  that  Biddle  had  mistaken  the  purpose  and  temper 
of  the  secretary,  who  had  blundered  into  a  position  favor- 
able to  Hill,  but  resented  with  indignation  the  imputation 
of  "  a  connexion  with  the  movements  of  these  other  people,"  * 
the  Hills  and  Kendalls,  whose  tool  he  was,  but  not  their 
conscious  coadjutor.5 

What  effect  did  this  contretemps  have  upon  Jackson? 
If  his  own  word  can  be  credited,  little  or  none.  He  wrote 
to  Biddle: 

I  feel  very  sensibly  the  services  rendered  by  the  Bank  at  the 
last  payment  of  the  national  debt  and  shall  take  an  opportunity  of 
declaring  it  publicly  in  my  message  to  Congress.  That  is  my  own 
feeling  to  the  Bank — and  Mr.  Ingham's  also — He  and  you  got  into 
a  difficulty  thro'  the  foolishness — if  I  may  use  the  term  of  Mr.  Hill. 
Observing  he  was  a  little  embarrassed  I  said  Oh  that  has  all 

1  Asbury  Dickins  to  Biddle,  Oct.  5, 1829,  B.  P. 

2  Biddle  to  Ingham,  Oct.  9, 1829,  H.  B.  460,  22d  Cong.,  1st  Sess.,  pp.  469-71. 

3  Oct.  9, 1829,  P.  L.  B.,  Vol.  Ill,  p.  76. 

*  Biddle  to  Dickins,  Sept.  30, 1829,  ibid.,  pp.  73,  74. 

5  Parton  asserts  that  Hill's  rejection  by  the  Senate  to  a  subordinate  post  in  the 
treasury  was  probably  considered  by  Jackson  due  to  the  bank.—  PAETON,  Life  of 
Jackson,  Vol.  Ill,  p.  274.  This  is  highly  improbable.  Benton  has  no  mention  of  it. 
The  alleged  reason  was  that  Hill  had  made  a  scandalous  attack  upon  Mrs.  Adams 
in  his  newspaper. — Ibid.,  and  ADAMS,  Memoirs,  Vol.  VIII,  p.  217.  This  was  sufficient 
reason.  There  is  no  trace  in  the  Biddle  correspondence  of  Biddle's  having  communi- 
cated the  Portsmouth  affair  to  any  of  the  politicians  before  the  investigation  of  1832. 
It  was  kept  very  quiet. 


180  THE  SECOND  BANK  OF  THE  UNITED  STATES 

passed  now.  He  said  with  the  Parent  Board  and  myself  [yourself  ?] 
he  had  ever[y]  reason  to  be  satisfied  —  that  he  had  heard  com- 
plaints and  then  mentioned  a  case  at  Louisville  —  of  which  he 
promised  to  give  me  the  particulars. 

I  said  Well  I  am  very  much  gratified  at  this  frank  explana- 
tion. We  shall  all  be  proud  of  any  kind  mention  in  the  message  — 
for  we  should  feel  like  soldiers  after  an  action  commenced  by  their 
General.  Sir  said  he  it  would  be  only  an  act  of  justice  to  mention 
it  [i.  e.,  the  bank's  services  to  the  government].1 

This  extract  shows  Jackson  amused,  indifferent,  and  open  in 
his  attitude,  perhaps  a  little  contemptuous  as  regards  poor 
Ingham,  whom  he  certainly  did  not  like,  and  whose  discomfi- 
ture was  in  all  probability  more  pleasing  to  him  than  otherwise. 
The  next  movement  against  the  bank  foreshadowed  Jack- 
son's attack  in  his  first  message.  On  the  30th  of  November 
Amos  Kendall  informed  James  Watson  Webb,  editor  of  the 
New  York  Courier  and  Enquirer,  that  the  president  would 
take  ground  against  the  bank  in  his  message,  and  furnished 
Webb  with  a  number  of  queries  for  publication,  in  which  a 
scheme  of  a  substitute  for  the  bank  was  outlined:2  Would 
the  state  banks  "take  measures  to  satisfy  the  general  gov- 
ernment of  their  safety  in  receiving  deposits  of  the  revenue ; 
and  transacting  the  banking  concerns  of  the  United  States?" 
Would  "the  Legislatures  of  the  several  states  adopt  resolu- 
tions on  the  subject  and  instruct  their  senators  how  to  vote  ?  " 
Would  "a  proposition  be  made  to  authorize  the  government 
to  issue  exchequer  bills,  to  the  amount  of  the  annual  revenue, 
redeemable  at  pleasure,  to  constitute  a  circulating  medium 
equivalent  to  the  notes  issued  by  the  United  States  Bank?" 
These  queries  appeared  in  the  Courier  and  Enquirer 
embodied  in  an  editorial  article,  with  no  intimation  that 

1  Letter  in  Biddle  Papers  without  date  or  signature,  but  undoubtedly  Jackson's 
and  written  in  November. 

2ff.  R.  460, 22d  Cong.,  1st  Sess.,  p.  80,  shows  that  the  article  appeared  on  the  30th. 
For  the  fact  see  Memoirs  of  J.  G.  BENNETT,  p.  111. 

3  For  the  queries  see  NILES,  Vol.  XXXVII,  p.  378,  Jan.  30,  1830. 


THE  BANK  AND  THE  DEMOCRACY      181 

they  came  from  the  administration.  In  them  is  to  be  found 
the  suggestion  of  the  removal  of  the  deposits,  of  the  experi- 
ment of  using  the  state  banks  as  places  of  deposit,  of  an 
attack  by  the  state  legislatures  upon  the  bank,  and  of  a  sub- 
stitute for  the  bank's  currency  supported  later  by  Jackson. 
That  the  act  of  Kendall  was  not  an  isolated  one  is  shown  by 
the  response  of  the  South  Carolina  legislature.  Resolutions 
were  introduced  there  requesting  their  representatives  in 
Congress  and  instructing  the  senators  of  South  Carolina  to 
oppose  the  re-charter  of  the  bank  unless  it  were  to  be  con- 
fined to  the  District  of  Columbia,  declaring  for  a  bank  with- 
out foreign  stockholders,  and  requesting  that  the  Senate 
Committee  on  Finance  should  be  asked  to  report  on  the 
feasibility  of  a  national  bank  without  private  stockholders.1 
To  Nicholas  Biddle  these  cumulative  assaults  were  a  reve- 
lation. He  believed  it  necessary  to  meet  the  attempts  to  over- 
throw the  bank  which  he  clearly  saw  were  already  making.2 
His  method  of  doing  this,  after  his  first  ebullition  of  anger 
and  indignation  expressed  in  the  Ingham  correspondence, 
was  to  adopt  the  means  of  conciliation  suggested  by  McLean 
and  Ingham,  namely,  to  appoint  friends  of  the  administra- 

ilbid.,  p.  275.  Resolutions  considered  Dec.  15.  Agreed  to  by  the  senate  of 
South  Carolina  by  a  vote  of  26  to  10.— Ibid.,  p.  367. 

2  From  this  time  the  bank  management  believed  that  there  was  a  settled  attempt 
to  secure  possession  of  the  bank  for  political  purposes :  "And  now  I  have  on  my  table 
an  official  communication  of  the  views  of  the  Administration  as  to  the  manner  in 
which  the  Bank  ought  to  choose  and  remove  its  officers It  is  regarded  gener- 
ally by  the  Board  as  showing  a  determination  to  injure  the  independence  of  the 
Bank,  on  a  point  where  it  is  peculiarly  sensitive  as  well  from  duty  as  from  honor  — 
and  accordingly  they  think  it  should  be  resisted  at  all  hazards  —  And  so  it  shall  be." 
—Biddle  to  Dickins,  Sept.  16, 1829,  P.  L.  B.,  Vol.  Ill,  p.  67. 

"  You  do  not  perhaps  know  that  soon  after  these  people  came  into  power, 
there  was  a  deliberation  in  caucus  of  the  most  active  of  the  Jackson  party  as  to  the 
means  of  sustaining  themselves  in  place  — and  the  possession  of  the  Bank  was 
ranked  as  a  primary  object."— Biddle  to  Thomas  Cooper,  of  Columbia,  S.  C.,  May  6, 
1833,  ibid..  Vol.  IV,  p.  481. 

The  committee  of  directors  in  Dec.,  1833,  made  the  same  charge  publicly. — 
Report  of  a  committee  of  directors  of  the  Bank  of  the  United  States,  Dec.  3, 1833,  p.  1. 
Kendall  stigmatized  the  statement  as  a  falsehood. —  Autobiography  of  AMOS  KEN- 
DALL, p.  392.  The  charge  was  also  denied  by  Hill,  March  3,  1834,  C.  D.,  Vol.  X, 
Part  I,  p.  770. 


182  THE  SECOND  BANK  OP  THE  UNITED  STATES 

tion  to  seats  at  the  boards  of  the  bank  and  the  branches. 
This  was  indeed  a  lame  and  impotent  conclusion  after  his 
brave  challenge  to  the  secretary,  his  bold  declaration  that 
"for  the  bank  ....  there  is  but  one  course  of  honor  or  of 
safety.  Whenever  its  duties  come  in  conflict  with  the  spirit 
of  party,  it  should  not  compromise  with  it,  nor  capitulate  to 
it,  but  resist  it  —  resist  it  openly  and  fearlessly."1  To  miti- 
gate the  wrath  of  his  enemies  and  deprive  them  of  their 
weapon  of  attack  he  appointed  men  who  were  friendly  to 
the  administration  as  directors  at  Baltimore,2  New  York,8 
Utica,4  Portsmouth,5  New  Orleans,6  and  the  western  offices. 
He  tried  to  put  himself  in  touch  with  the  administration, 
opening  a  correspondence  with  Major  Lewis,  Jackson's  most 
intimate  and  confidential  adviser;  and  he  expressed  himself 
"desirous  of  treating  Major  Barry  with  great  kindness  and 
liberality  " — Major  Barry  owing  money  to  the  bank  and  being 
unable  to  pay  it  when  due.7 

There  has  been  much  conjecture  as  to  the  origin  and 
nature  of  Jackson's  opposition  to  the  bank.  Historians  in 
general  believe  that  he  did  not  contemplate  action  in  regard 
to  it  when  he  first  came  to  Washington  as  president.  His 
relations  with  it,  they  think,  conclusively  prove  this.  It  is 
true  that  he  had  been  offended  by  the  refusal  of  the  New 
Orleans  branch  to  cash  his  drafts  on  the  secretary  of  state,8 
but  he  would  hardly  remember  this  trivial  annoyance.  On 
the  other  hand,  declare  Parton  and  von  Hoist,  he  had 
recommended  in  1821  the  establishment  of  a  branch  at 
Pensacola,  and  so  late  as  1828  the  appointment  of  certain 

1  H.  R.  460,  22d  Cong.,  1st  Sess.,  p.  455. 

2  Biddle  to ,  at  Baltimore,  Nov.  22,  1829,  DAWSON,  Historical  Magazine,  2d 

ser.,  Vol.  IX,  pp.  10, 11. 

3  Biddle  to  I.  Lawrence,  Nov.  27, 1829,  P.  L.  B.,  Vol.  Ill,  p.  96. 
*  Biddle  to  General  P.  B.  Porter,  Sept.  25, 1829,  ibid.,  p.  70. 

6  Biddle  to  Cadwalader,  Aug.  28,  1829,  B.  P. 

6  Biddle  to  W.  B.  Lewis,  Nov.  29, 1829,  P.  L.  B.,  Vol.  Ill,  p.  97. 

i  Biddle  to  Lewis,  Dec.  7, 1829,  ibid.,  p.  102.  »  PARTON,  Vol.  II.  p.  596. 


THE  BANK  AND  THE  DEMOCRACY      183 

officers  at  the  Nashville  branch.1  Now  there  is  no  doubt 
that  Jackson  had  done  both  of  these  things,  but  they  have 
little  significance,  since  nothing  is  easier  than  to  secure 
signatures  to  a  petition,  which  was  all  that  either  act 
amounted  to.2  Moreover,  the  letter  recommending  officers 
for  the  Nashville  branch  was  not  written  in  1828,  but  in  1818. 
With  this  correction  of  dates,  the  whole  weight  of  the  argu- 
ment is  removed,  and  Jackson's  act  loses  all  significance  in 
the  determination  of  his  attitude  in  1829.8  Of  his  opposi- 
tion to  the  bank  before  coming  to  Washington  there  exists, 
moreover,  incontrovertible  proof.  In  1827  Biddle  was 
warned  that  Jackson  had  opposed  the  repeal  of  the  Tennes- 
see law  taxing  branches  established  in  that  state.*  James  A. 
Hamilton,  writing  of  an  interview  with  Jackson  in  Decem- 
ber, 1827,  says  that  "  he  expressed  strong  opinions  against 
the  Bank  of  the  United  States." 5  He  had  undoubtedly 
wished  to  insert  a  paragraph  attacking  the  bank  in  his 
first  inaugural,  but  had  been  dissuaded  by  politicians  wiser 

1  PAETON,  Vol.  Ill,  p.  257,  quoting  HUGH  L.  WHITE'S  Memoirs;  VON  HOLST,  Vol. 
II,  p.  32. 

2  See  J.  Q.  ADAMS,  Memoirs,  Vol.  VIII,  pp.  212,  213,  commenting  on  the  fact  that 
Chief  Justice  Marshall  and  Justice  McLean  had  actually  recommended  the  notori- 
ous Henry  Lee  for  an  office,  his  nomination  to  which  was  unanimously  rejected  by 
the  Senate,  "  on  account  of  the  surpassing  infamy  of  his  character." 

3  See  the  letter  in  8.  D.  17,  23d  Cong.,[2d  Sess.,  pp.  233,  234.    In  signing,  Jackson 
adds  to  his  name  "  Major-General  Southern  Division."    He  had  resigned  his  com- 
mission in  1821  (PAETON,  Vol.  II,  p.  590),  and  would  not  have  signed  in  this  fashion 
later  than  that.    The  letter,  moreover,  though  undated,  is  placed  by  the  committee 
among  the  documents  of  1817.    It  speaks  of  the  "  anticipation  of  the  location  at  this 
place  of  a  branch  of  the  United  States  Bank."    This  was  anticipated  both  in  1818 
and  in  1827,  but  not  in  1828.    Jackson  could  not  have  signed  in  1827 ;  see  next  note. 

*"Mr.  Hill  one  of  the  Louisville  directors,  now  here,"  declares  that  "Gen'l 

J n  had  done  everything  in  his  power  to  prevent  the  repeal  of  the  Law  in 

Tennessee  taxing  the  B.  U  S.,  and  would  have  succeeded  if  there  had  been  a  delay 
of  a  single  day  more  in  coming  to  the  decision.  The  repeal  was  carried  in  one  of  the 
Houses,  as  he  states,  by  one  vote. "—Cashier  McHvaine  to  Biddle,  Jan.  27, 1827,  B.  P. 

"  The  informant  of  Mr.  Hill  of  Louisville  respecting  the  Hostility  of  Gen'l 
Jackson  to  a  Tennessee  Branch  was  Colonel  Wm.  Robinson  of  Pittsburgh,  who  hap- 
pened to  be  in  Nashville  when  the  subject  was  discussed,  and  who  stated  positively 
that  the  repeal  was  effected  in  one  of  the  houses  by  a  single  vote." — Mcllvaine  to 
Biddle,  Jan.  29, 1827,  ibid. 

5  Reminiscences  of  James  A.  Hamilton,  p.  69. 


184  THE  SECOND  BANK  OP  THE  UNITED  STATES 

than  himself.1  Again  in  1829  Lewis  wrote  that  Jackson  had 
certainly  been  led  to  believe  "  during  the  pendency  of  the 
presidential  election  "  that  the  Lexington  branch  had  acted 
toward  his  candidacy  in  an  unfriendly  manner,  loaning 
money  with  the  object  of  defeating  him.2  This  conviction 
gave  a  personal  flavor  to  Jackson's  -  opposition,  yet  that 
opposition  was  at  bottom  not  personal,  but  based  upon  con- 
stitutional and  social  opinions.  The  bank  was  in  Jackson's 
opinion  unconstitutional,  and,  as  a  powerful  privileged 
monopoly,  dangerous  to  society.  He  himself  expressed  these 
ideas  freely  to  Biddle,  and  at  the  same  time  indicated  the 
origin  of  his  dislike  of  banks : 

I  think  it  right  to  be  perfectly  frank  with  you.  I  do  not  think 
that  the  power  of  Congress  extends  to  charter  a  Bank  ought  of 
the  ten  mile  square. 

I  do  not  dislike  your  Bank  any  more  than  all  banks.  But  ever 
since  I  read  the  history  of  the  South  Sea  bubble  I  have  been 
afraid  of  banks.8 

After  this  naive  and  delightfully  Jacksonian  reason  for 

1  Parton  considers  this  a  tradition. — Vol.  Ill,  pp.  258,  259.  Von  Hoist  also  con- 
siders it  a  "tradition  of  the  democratic  party  ....  not  well  founded.'' — Vol.  II,  pp. 
SI,  32.  But  the  assertion  was  made  with  great  particularity  by  Polk  in  1833,  and  he 
could  not  be  mistaken :  "  It  was  very  well  known  that  the  opinion  of  the  President, 
adverse  to  the  United  States  Bank,  was  not  of  recent  origin At  the  Hermi- 
tage, before  he  prepared  his  inaugural  address,  he  had  communicated  his  opinion — 
a  fact  which  was  susceptible  of  proof.  But  it  was  thought  best  not  to  make  public 
communication  of  this  opinion,  until  he  should  send  his  first  message  to  Congress. 
On  this  account  it  was  not  introduced  into  his  inaugural  address." — Dec.  30, 1833, 
C,  D.,  Vol.  X,  Part  II,  p.  2263.  See  also  BLAIE,  Extra  Globe,  Vol.  I,  p.  90 ;  Bancroft's 
Eulogy  of  Jackson,  June,  1845;  INGEKSOLL,,  History  of  the  War  of  1812,  Vol.  II,  p. 
264.  Jackson,  in  Sept.,  1833,  said:  "The  President's  convictions  of  the  dangerous 
tendencies  of  the  Bank  of  the  United  States,  ....  were  so  overpowering  when 
he  entered  on  the  duties  of  Chief  Magistrate  that  he  felt  it  his  duty,  notwithstand- 
ing the  objections  of  the  friends  by  whom  he  was  surrounded,  to  avail  himself  of  the 
first  occasion  to  call  the  attention  of  Congress  and  the  people  to  the  question  of  its 
recharter." — Messages  and  Papers,  Vol.  Ill,  p.  5,  paper  of  Sept.  18, 1833. 

2 "He  certainly  had  been  led  to  believe  from  the  complaints  of  his  friends, 
during  the  pendency  of  the  presidential  election,  that  the  Lexington  branch  in  dis- 
pensing its  golden  favours,  in  the  way  of  discounts,  had  manifested  great  partiality." 
— Lewis  to  Biddle,  Oct.  16, 1829,  B,  P.  Lexington  was  near  Clay's  residence. 

3  Letter  to  Biddle,  in  Biddle  Papers,  no  date,  no  place,  no  signature,  but  indu- 
bitably Jackson's,  and  written  in  Nov.,  1829.  See  for  further  expression  on  the  con- 
stitutional aspect  of  the  question  quotations  from  same  letter,  p.  192,  infra. 


THE  BANK  AND  THE  DEMOCRACY      185 

fearing  all  banks,  after  this  frank  confession  of  constitu- 
tional scruples,  no  one  need  henceforth  seek  for  the  motives 
or  the  origin  of  Jackson's  opposition.  He  fails  to  tell 
Biddle  just  when  he  had  read  the  history  of  the  South  Sea 
bubble,  but  whenever  it  happened  it  fixed  him  against 
banks.  Let  it  be  noted,  too,  that  his  dislike  was  for  banks 
in  general,  and  not  for  the  Bank  of  the  United  States  in 
particular.1 

1  "  I  understand  from  Dickins  ....  that  General  Jackson's  antipathy  is  not  to 
the  Bank  of  the  United  States  in  particular,  but  to  all  banks  whatever.  He  considers 
all  the  State  Banks  unconstitutional  and  impolitic  and  thinks  that  there  should  be  no 
Currency  but  coin,  that  the  Constitution  designed  to  expel  paper  altogether  as  any 
part  of  our  monetary  system."— C.  J.  Ingersoll  to  Biddle,  Feb.  2, 1832,  B.  P. 


CHAPTER  IX 

ATTEMPTS  TO  SECURE  JACKSON'S  ASSENT  TO  A 
RE-CHARTER 

BIDDLE  was  early  awake  to  the  possibility  of  Jackson's 
enmity,  and  began  immediately  to  calculate  the  chances  of 
renewal,  In  March,  1829,  he  thought  them  good;1  but, 
anxious  to  make  them  better,  he  bestirred  himself  to  produce 
a  favorable  effect  upon  Jackson.  His  plan  was  to  convince 
the  president  of  the  usefulness  of  the  bank  to  the  govern- 
ment and  to  the  commercial  community  in  its  management 
of  the  disbursement  of  payments  of  the  public  debt.2  He  at 
once  comprehended  the  position  held  by  Major  Lewis,  and 
in  June  addressed  a  letter  to  him  in  reference  to  the  appoint- 
ment of  directors  at  the  Tennessee  branch,  in  which  Lewis 
might  presumably  be  interested.3  Lewis  in  return  expressed 
himself  as  "  much  gratified  at  the  selection "  of  directors, 
and  added:  "  If  your  Directory  is  composed  of  men  of  influ- 
ence, and  in  whom  the  people  have  confidence,  it  will  have 
a  tendency  to  prevent  opposition  in  a  good  degree."*  In 
other  words,  it  was  advisable  to  appoint  men  who  were  in 
sympathy  with  the  political  party  in  power,  for  only  such 
could  have  the  confidence  of  the  people  in  the  sense  here 
implied. 

In  October,  after  the  brush  with  Ingham,  Biddle  became 
aware  that  Jackson  had  personal  reasons  for  supposing  the 
bank  inimical  to  him,  and  he  undertook  to  remove  these 

1  Biddle  to  Jos.  Kingsbury,  March  6, 1829,  P.  L.  B.,  Vol.  in,  p.  18. 

2  To  A.  Dickins,  May  19, 1829,  ibid.,  p.  43. 

3  As  the  bank  was  accustomed  to  take  the  opinions  of  all  sorts  of  persons  on 
such  subjects,  where  these  opinions  could  be  useful,  there  is  no  valid  reason  to  find 
fault  with  this  step. 

*  Lewis  to  Biddle,  June  28, 1829,  B.  P. 

186 


ATTEMPTS  TO  SECURE  JACKSON'S  ASSENT     187 

impressions.  He  wrote  to  Lewis  regarding  the  charges 
made  against  the  Kentucky  branches,  and  to  rebut  these 
forwarded  a  letter  from  an  ardent  Jackson  partisan  who  was 
a  director  at  Lexington,  which  indignantly  denied  the  truth 
of  the  reports,  and  which  he  asked  Lewis  to  show  to  the 
president.1  This  Lewis  did.  Jackson  was  pleased,  Lewis 
wrote : 

It  is  gratifying  to  him  ....  he  says  to  learn  that  probably 
there  was  no  just  cause  for  those  complaints,  or  at  least,  that 
they  possibly  had  been  much  exaggerated.  He  requested  me  to 
say,  that  he  has  too  much  confidence  in  you  to  believe  for  a 
moment,  that  you  would  knowingly  tolerate  such  conduct  in  the 
Branches  of  your  Bank;  but  from  the  complaints  which  are  still 
made  with  regard  to  some  of  them,  particularly  the  one  at  New 
Orleans,  he  thinks  it  not  improbable  that  party  feeling  may  yet 

have  some  influence  upon  their  operations The  President 

thinks,  as  you  do,  that  the  Bank  of  the  United  States  should  recog- 
nize no  party;  and  that  in  all  its  operations,  it  should  have  an  eye 
single  to  the  interests  of  the  stockholders  and  the  good  of  the 
country. 

"Some  of  our  friends  in  Nashville,"  he  continued,  com- 
plain about  directors  from  outside,  and  that  ought  to  be 
corrected  "to  prevent  jealousies  and  unpleasant  feelings."2 
This  letter  undoubtedly  expresses  accurately  Jackson's  atti- 
tude toward  the  bank  and  its  head.  It  shows  that  he  was 
still  suspicious  of  political  activity  on  the  part  of  some  of 
the  offices ;  that  he  believed  that  the  bank  should  not  engage 
in  politics  either  for  or  against  him ;  that  both  he  and  Lewis 
thought  that  Jackson  partisans  were  discriminated  against  in 
appointments  to  the  directories ;  and  that  Lewis  was  inclined 
to  place  the  Nashville  office  on  what  he  considered  a  fairer 
footing  by  putting  more  friends  of  the  administration  upon 
its  board.  His  reasons  for  this  are  political  exclusively. 
Biddle  might  well  have  objected  that  this  was  an  attempt 

1  To  Lewis.  Oct.  14, 1829,  P.  L.  B.,  Vol.  Ill,  p.  75. 
a  Lewis  to  Biddle,  Oct.  16, 1829,  B.  P. 


188  THE  SECOND  BANK  OP  THE  UNITED  STATES 

which  denied  flatly  the  expressed  opinion  that  party  consid- 
erations should  not  be  intruded  into  bank  affairs,  but  he 
recognized  that  Jackson  would  consider  a  refusal  to  place 
Democrats  on  the  board  as  being  in  itself  a  political  discrim- 
ination. Lewis's  letter  also  proves  that  Jackson  was  per- 
sonally well  disposed  to  Biddle,  and  such  was  his  feeling  for 
a  considerable  period  after  this  date.1 

Altogether  Biddle  saw  reason  to  think  that  the  situation 
was  not  a  difficult  one,  and  that  the  most  material  matter 
was  to  disabuse  Jackson's  mind  of  the  suspicions  about  the 
branches.  For  this  purpose  he  sent  a  friend  to  Washington, 
who  reported  that  the  president  was  satisfied  that  the  parent 
board  knew  nothing  of  the  political  abuses  at  the  branches, 
if  such  abuses  existed,  and  asserted  that  the  bank  "  was  a 
blessing  to  the  country  administered  as  it  was,  diffusing  a 
healthful  circulation,  sustaining  the  general  credit  without 
partiality  or  political  bias."2  Biddle  followed  up  this 
auspicious  beginning  by  dispatching  the  cashier  and  one  of 
the  directors  of  the  New  Orleans  office  to  repel  the  charges 
against  it,  and  succeeded  in  dispelling  all  suspicion.  "  Not 
the  least  doubt  remained  on  his  mind,"  said  Jackson,  that 
the  charges  against  the  New  Orleans  office  were  unfounded.8 

'Thus  Jackson  always  nominated  Biddle  as  a  government  director  until  the 
struggle  for  re-charter.  In  July,  1830,  Biddle  was  assured  that  "  he  speaks  of  you  in 
the  most  exalted  terms  and  says  that  there  is  no  gentleman  that  can  be  found — would 
manage  the  Bank— better  or — do  the  Bank  and  Country  more  justice." — J.  Nichol, 
president  branch  of  Nashville,  to  Biddle,  July  20, 1830,  B.  P. 

2  "  I  cannot  withhold  a  moment  the  pleasure  it  gives  me  in  saying  the  result  of 
my  visit  is  most  satisfactory,  inasmuch  as  the  President  expressed  himself  in  the 
most  clear  and  decided  manner  friendly  to  the  Bank  '  that  it  was  a  blessing  to  the 
country  administered  as  it  was,  diffusing  a  healthful  circulation,  sustaining  the 
general  credit  without  partiality  or  political  bias  that  he  entertained  a  high  regard 
for  its  excellent  President,  (I  use  his  own  words)  who  with  the  Board  of  the  Parent 
Bank  possess'd  his  entire  confidence  and  indood  his  thanks  for  the  readiness  and 
cordiality  with  which  they  had  seemed  to  meet  the  views  of  Government— he  said  it 
was  true  many  complaints  had  been  made  of  partiality  in  the  Branchee  in  Kentucky 
and  New  Orleans,  but  further  added  if  these  complaints  have  any  foundation,  he 
was  persuaded  the  Parent  board  knew  nothing  of  them,  and  if  they  did  would  not 
sanction  them."— M.  L.  Bevan  to  Biddle,  Oct.  21, 1829,  ibid. 

3"  .  .  .  .  that  he  was  entirely  convinced  that  no  hostility  to  his  administration 
was  exercised  by  the  Board  of  the  Parent  Bank,  and  that  in  reference  to  yourself 


ATTEMPTS  TO  SECURE  JACKSON'S  ASSENT     189 

Biddle  thought  the  moment  so  opportune  that  he  sent  word 
to  Lewis  urging  him  to  procure  from  the  president  a  favor- 
able mention  in  the  annual  message  of  the  bank's  services  in 
making  payments  of  the  public  debt,1  to  which  Lewis  replied : 
"  I  think  you  will  find  the  old  fellow  will  do  justice  to  the 
Bank  in  his  message  for  the  handsome  manner  in  which  it 
assisted  the  Government  in  paying  the  last  installment  of  the 
national  debt." 2  And  so  he  did,  as  anyone  may  perceive  by 
turning  to  the  message. 

It  was  at  this  juncture  that  Jackson  politicians  received 
appointments  to  the  branch  directories  from  one  end  of  the 
country  to  the  other,  and  Biddle,  convinced  that  the  impres- 
sion made  upon  the  mind  of  the  president  was  sufficient, 
determined  to  seize  the  favorable  moment  to  assure  the 
bank's  future.  Perceiving  the  vanity  which  was  so  promi- 
nent a  feature  in  the  character  of  Jackson,  the  astute  head 
of  the  bank  suggested  to  Lewis  that  the  hero  of  New  Orleans 
might  add  new  glories  to  the  8th  of  January  by  arranging  for 
the  complete  discharge  of  the  national  debt  upon  that  day 
in  1833,  just  before  his  final  retirement.  The  idea  pleased 
Jackson.  "  If  you  see  Mr.  Biddle  say  to  him  the  President 
would  be  glad  to  see  his  proposition  for  sinking  or  paying 
off  the  three  per  cent  stock,"  wrote  Lewis,8  and  Biddle,  con- 

particularly  he  had  the  most  unbounded  confidence  in  the  purity  of  your  intentions. 
....  He  should  have  been  satisfied,  he  said  by  your  letter  alone  of  the  want  of  any 
foundation  for  the  accusations  against  the  office  at  New  Orleans  ....  not  the  least 
doubt  remained  on  his  mind." — Samuel  Jaudon  to  Biddle,  Oct.  26, 1829,  ibid. 

Mn  speaking  of  the  amount  of  debt  paid  off  in  1829  he  naturally  would  say 
"  that  in  July  last  a  larger  payment  of  the  principal  of  the  public  debt  was  made 
than  was  ever  redeemed  at  any  former  period— that  looking  to  frequent  payments  of 
a  similar  kind  in  future  the  effect  of  that  in  July  was  an  object  of  great  solicitude 
and  it  was  very  satisfactory  to  perceive  that  this  large  displacement  of  funds  was 
accomplished  without  the  least  shock  or  inconvenience  to  any  branch  of  industry  — 
'  a  result  which  it  is  but  justice  to  ascribe  in  a  great  degree  to  the  judicious  arrange- 
ments of  that  excellent  institution  the  B.  U.  /S.'  " — Memorandum  given  to  Mr.  Walsh 
Nov.  9, 1829,  the  substance  of  which  he  was  to  write  to  Win.  B.  Lewis  for  Qeneral 
Jackson's  perusal,  ibid. 

2  Lewis  to  H.  Toland,  Nov.  11, 1829,  ibid. 

3  Ibid.    He  adds :  "  He  had  better  write  to  me  when  his  leisure  will  permit  and 
I  will  submit  it  to  the  General."   A  little  earlier  he  had  written :  "  Say  to  Mr.  Biddle 


190  THE  SECOND  BANK  OF  THE  UNITED  STATES 

fident  that  the  critical  moment  had  come,  submitted  a  plan 
for  the  extinction  of  the  debt  through  the  renewal  of  the 
bank's  charter. 

No  suspicion  has  heretofore  arisen  that  the  two  presi- 
dents ever  approximated  a  relation  where  one  could  make  and 
the  other  consider  a  proposition  of  this  character.  And  yet 
nothing  could  be  more  natural.  Biddle  was  not  unfriendly 
to  Jackson,  while  Jackson  expressed  a  hearty  regard  for 
him.  Why  should  the  two  not  agree  upon  a  plan  for  the 
continuation  of  the  charter  and  the  payment  of  the  national 
debt  at  the  same  time,  and  thus  settle  with  mutual  satisfac- 
tion a  question  which  might  give  rise  to  future  difficulties? 
So  Biddle  reasoned.  His  plan  was  interesting  and  brilliant: 
For  a  new  charter  for  twenty  years  the  bank  would  exchange 
with  the  government  $7,000,000  of  5  per  cent,  stock  held 
by  it  for  the  government's  $7,000,000  in  bank  stock,  and 
then  in  return  for  one-half  of  the  3  per  cent,  revolutionary 
stock,  the  whole  of  which  at  the  time  amounted  to  over 
$13,200,000,  the  bank  would  assume  the  government's  obliga- 
tion to  pay  the  whole.  In  this  manner  over  $20,000,000  of 
the  debt  would  be  paid  immediately,  leaving  only  so  much 
as  the  government  could  discharge  by  January  or  Febru- 
ary, 1833.  A  small  part  of  this,  it  was  true,  would  not  be 
payable  until  after  that  date,  and  the  government's  creditors 
might  not  choose  to  surrender  it,  but  in  that  case  the  bank, 
on  payment  to  it  of  the  amount  by  the  government,  would 
assume  that  portion  as  well,  and  thus  the  country  would  be 
completely  freed  from  debt.  Briefly  stated,  this  proposition 
was  that  the  government  should  present  the  bank  with 
$13,648,124.72,  whereupon  the  bank  would  discharge  at 
once  $20,296,249.45  of  the  public  debt.  At  the  first  glance 
this  looks  as  if  the  bank  proposed  to  present  the  government 

the  President  is  much  gratified  with  the  report  I  have  made  him  upon  the  project  of 
his  Bank.  All  things  with  regard  to  it  will  be  well."— Lewis  tr  H.  Toland,  Nov.  9, 
1829,  in  Biddle's  handwriting,  B.  P. 


ATTEMPTS  TO  SECURE  JACKSON'S  ASSENT     191 

with  $6,648,124.73,  but  it  must  be  remembered  that  the  bank 
stock  which  the  government  held,  though  nominally  worth 
only  $7,000,000,  was  worth  considerably  more  in  the  market 
and  would  appreciate  still  further  if  the  charter  were  renewed. 
Biddle  calculated  that  it  would  be  worth  $8,500,000  in  that 
contingency,  but  it  was  already  worth  that  sum,  and  with  a 
renewed  charter  it  would  undoubtedly  have  sold  for  ten  or 
eleven  millions.  Meanwhile  the  3  per  cent,  stock  was  below 
par,  so  that  the  sum  of  that  stock  would  have  been  worth  less 
than  $13,000,000.  On  the  whole,  the  bank  would  have  lost 
little  or  nothing  if  its  suggestion  had  been  adopted.  Biddle 
not  only  made  this  offer,  but  said  that  the  bank  would  prob- 
ably pay  a  bonus  of  $1,500,000,  and,  for  Jackson's  benefit,  he 
argued  the  constitutionality  and  expediency  of  the  bank  at 
length,  declaring  that,  if  the  charter  were  not  renewed,  three 
months  after  its  cessation  would  see  a  suspension  of  specie 
payments  in  the  United  States  and  the  ruin  of  the  state 
banks.1 

The  president's  answer  to  this  proposition,  contained  in 
what  seems  to  have  been  the  only  communication  he  ever 

i  National  debt  on  Jan.  1, 1830       ....     $48,522,869.93 

Redeemable  at  pleasure,  5  per  cent,  bank  stock        -       -  $  7,000,000.00 

Redeemable  at  pleasure,  3  per  cent,  stock      ....  13,296,249.45 

Redeemable  in  1830  at  any  time 7,998,793.92 

Redeemable  in  1831,  Jan.  1  and  22 18,901.54 

Redeemable  in  1832 11,018,900.72 

Redeemable  in  1833 2,227,363.97 

Redeemable  in  1834 2,227,363.98 

Redeemable  in  1835 4,735,296.30 

$48,522,869.93 

Biddle  then  says  that  in  consideration  of  re-charter,  the  receipt  of  the  $7,000, 
000  of  5  per  cent,  stock  subscribed  to  the  bank  for  the  government's  shares,  and 
of  half  the  3  per  cents,  (say  $6,648,124.72),  the  bank  will  give  the  government 
$7,000,000  of  5  per  cent,  stock  and  assume  the  payment  of  the  principal  and  interest 
of  the  whole  $13,296,249.25  of  the  3  per  cents.,  "  thus  striking  off  $20,296,249.25  of  the 
debt."  A  long  calculation  is  then  entered  into  showing  that  the  rest  of  the  debt, 
with  the  exception  of  $2,145,036.04,  can  be  discharged  on  Jan.  1, 1833.  The  bank  would 
probably  take  this  from  the  government,  on  payment  of  the  principal  to  it,  thus 
relieving  the  government  entirely  from  debt. — Biddle  to  W.  B.  Lewis,  Nov.  15, 1829, 
and  again  on  the  17th,  P.  L.  B.,  Vol.  Ill,  pp.  84-91.  Biddle's  addition  in  the  cents 
columns  is  erroneous. 


192  THE  SECOND  BANK  OP  THE  UNITED  STATES 

directed  immediately  to  Biddle,  is  interesting  and  curious, 
and  should  have  revealed  to  the  latter  Jackson's  position: 

Mr.  Biddle:  I  was  very  thankful  to  you  for  your  plan  of  pay- 
ing off  the  debt  sent  to  Major  Lewis.  I  thought  it  my  duty  to 
submit  it  to  you. 

I  would  have  no  difficulty  in  recommending  it  to  Congress, 
but  I  think  it  right  to  be  perfectly  frank  with  you.  I  do  not  think 
that  the  power  of  Congress  extends  to  charter  a  Bank  ought  of  the 
ten  mile  square  ....  I  have  read  the  opinion  of  John  Marshall 
who  I  believe  was  a  great  and  pure  mind — and  could  not  agree 
with  him — though  if  he  had  said,  that  as  it  was  necessary  for  the 
purposes  of  the  national  government  there  ought  to  be  a  national 
bank  I  should  have  been  disposed  to  concur.1 

This  was  a  plain  negative  to  Biddle' s  project,  stating  frankly 
Jackson's  constitutional  objections,  yet  revealing  at  the 
same  time  his  opinion  that  a  bank  was  necessary  to  carry 
out  the  financial  operations  of  the  government  and  consti- 
tutional if  established  in  the  District. 

Biddle  immediately  went  to  Washington  for  an  interview 
with  the  president  and  his  advisers.  The  arguments  he 
offered  are  unknown,  but  Jackson  merely  repeated  what  he 
had  already  written.2  Biddle  was  pleased  with  the  inter- 
view, however,  writing  to  Robert  Lenox  that  he  "found  with 
great  pleasure  a  friendly  feeling  towards  the  Bank  in  the 
minds  of  the  President  and  his  particular  friends  who  for- 
merly entertained  different  views." 3  These  particular  friends 
were  not  members  of  the  cabinet,  for  he  said  later  that  he 

1  Letter  without  date,  place,  or  signature. — B.  P. 

2  "  In  regard  to  what  passed  at  Washington  I  speak  of  it  with  great  reserve,  but 
to  you,  I  have  none  —  and  will  therefore  say  that  the  President  spoke  in  the  highest 
terms  of  confidence  in  the  administration  of  the  Bank  —  and  particularly  of  the 
assistance  which  the  Bank  had  afforded  to  the  Government,  in  July  last  —  of  which 
he  intended  to  bear  public  testimony  in  his  message  to  Congress.    He  mentioned 
that  he  doubted  the  right  of  the  Government  to  incorporate  a  Bank  out  of  the  Dis- 
trict."—Biddle  to  Senator  S.  Smith,  Jan.  2, 1830,  P.  L.  B.,  Vol.  ITT,  pp.  129, 130. 

Biddle's  plan  of  a  re-charter  was  sent  on  the  15th  and  17th.  On  or  immediately 
after  the  17th  he  went  to  Washington,  and  returned  on  the  26th. 

3  To  Robert  Lenox,  Dec.  4, 1829,  P.  L.  B.,  Vol.  HI,  p.  99.    See  also  letter  in  DAW- 
SON'S  Historical  Magazine,  Nov.  22,  Vol.  IX,  2d  ser.,  p.  10. 


ATTEMPTS  TO  SECURE  JACKSON'S  ASSENT     193 

had  no  conversation  with  "  any  other  member  of  the  admin- 
istration. " 1  Lewis  was,  of  course,  one  of  the  particular 
friends,  but  he  had  never  "entertained  different  views."8  It 
is  necessary  to  infer  that  the  others  were  various  members 
of  the  Kitchen  Cabinet.  No  doubt  he  had  also  learned  that 
a  majority  of  the  cabinet  was  favorable  to  the  bank.3  But 
he  had  failed  completely  to  perceive  in  the  obscure  back- 
ground the  menacing  and  sinister  figure  of  the  most  power- 
ful, most  determined,  and  most  subtle  enemy  of  the  bank, 
Amos  Kendall.  The  attitude  of  Van  Buren  was  likewise 
unguessed. 

So  confident  was  Biddle  of  a  favorable  issue  that  he  spoke 
unguardedly  to  his  friends  of  what  had  passed  at  the  inter- 
view, and  it  was  reported  to  Jackson  that  he  had  given, 
assurances  to  individuals  in  Baltimore  "that  the  charter 
should  be  renewed"  with  the  good- will  of  the  president.* 
Jackson  was  surprised  and  offended,  declaring  that  he  had 
never  given  any  such  assurances,  and  that  "  Major  Biddle 
acknowledged  my  frankness  to  him  on  this  subject  to  Major 
Lewis  and  others."  He  suspected  that  Biddle  had  spread 
the  report  in  order  to  facilitate  speculation  in  the  stock.5 
He  declared  that  he  was  "pledged  against  the  Bank"6 — a 

1  To  John  McKim,  Jr.,  of  Baltimore,  Jan.  13, 1830,  P.  L.  B.,  Vol.  Ill,  p.  138. 

2  " .  .  .  .  that  I  have  always  been  in  favor  of  a  National  Bank  of  some  descrip- 
tion, and  should  not  object  to  the  rechartering  this  present  Bank  with  modifica- 
tions."—Lewis  to  J.  A.  Hamilton,  Jan.  1,  1832,  Reminiscences  of  James  A.  Hamilton, 
p.  236. 

3  Jackson  says  in  a  letter  to  Hamilton  in  relation  to  the  bank  paragraph  in  th« 
first  message,  that  he  "  disliked  to  act  contrary  to  the  opinion  of  so  great  a  majority 
of  my  cabinet."— Dec.  19, 1829,  ibid.,  p.  151. 

*  The  rumors  that  "  I  gave  assurances  to  those  gentlemen  I  saw  in  Baltimore 
that  the  interest  of  the  Bank  stood  fair  with  the  administration,  that  I  had  every 
assurance  of  the  President  and  others  of  their  friendship  for  the  Bank  and  their  good 
will  that  the  Charter  should  be  renewed  and  that  I  expected  something  handsome 
from  the  President  in  his  speech  ....  must  be  some  great  mistake." — Biddle  to 
John  McKim,  Jr.,  of  Baltimore,  Jan.  13, 1830,  P.  L.  B.,  Vol.  Ill,  p.  138. 

5  Jackson  to  J.  A.  Hamilton,  Jan.  1,  1830,  Reminiscences,  p.  154.  Hamilton  had 
sent  to  Jackson  a  letter  from  Duff  Green,  containing  reports  of  Biddle's  supposed 
conversation,  ibitl.,  p.  152. 

•  J.  A.  Hamilton  to  a  friend,  Washington,  Nov.  28, 1829,  ibid.,  p.  150. 


194  THE  SECOND  BANK  OF  THE  UNITED  STATES 

statement  which  leaves  no  doubt  that  he  had  not  been 
entirely  ingenuous  in  his  conversation  with  Biddle.  Of  this, 
however,  Biddle  had  no  suspicion.  When  on  the  27th  of 
November  Alexander  Hamilton,  son  of  Washington's  great 
secretary,  warned  him  that  the  president's  message  would 
treat  the  subject  of  renewal  in  an  unfriendly  manner,1  he 
replied  that  he  did  not  believe  it,  since  in  a  "  conversation 
of  a  very  full  and  frank  character  with  the  President  about 
the  Bank  ....  he  never  intimated  such  a  purpose.  I 
look  to  the  message,"  he  concluded,  "with  expectations 
of  the  most  satisfactory  kind."2  He  knew,  in  fact,  that 
it  would  contain  words  of  commendation  for  the  bank.  His 
surprise  and  dismay,  therefore,  when  he  discovered  what 
else  it  contained,  were  extreme.3 

The  message  was  both  surprising  and  alarming.  After 
pronouncing  an  encomium  upon  the  bank's  usefulness  to  the 
treasury,  Jackson  asserted  that  "both  the  constitutionality 
and  the  expediency  of  the  law  creating  this  bank  are  well 
questioned  by  a  large  portion  of  our  fellow-citizens,  and  it 
must  be  admitted  by  all  that  it  has  failed  in  the  great  end 
of  establishing  a  uniform  and  sound  currency."4  The 
declaration  that  the  bank's  currency  was  not  sound  and  uni- 
form was  particularly  offensive  to  the  bank's  supporters: 
"What  do  you  think  of  the  assertion  that  the  Bank  has  not 
produced  an  uniform  and  solid  currency?"  asked  John 
Sergeant.  "  Did  you  believe  that  any  man  who  valued  his 
character  for  common  intelligence  and  veracity  would  have 
hazarded  such  a  declaration  in  the  face  of  this  community 

1  Nov.  27,  1829,  B.  P.    Hamilton  probably  received  his  information  from  his 
brother,  who  wrote  the  final  draft  of  the  message. 

2  Nov.  28, 1829,  P.  L.  B.,  Vol.  Ill,  p.  98. 

3 "  The  result  I  see  with  equal  surprize  and  regret  ....  when  I  recollect  all 
that  I  saw  and  heard  at  Washington,  my  surprize  at  the  contents  of  the  message 
increases  every  moment." — Biddle  to  A.  Hamilton,  Dec.  9, 1830,  ibid.,  p.  103. 

<  Messages  and  Papers  of  the  Presidents,  Vol.  II,  p.  462. 


ATTEMPTS  TO  SECURE  JACKSON'S  ASSENT     195 

and  in  contradiction  of  the  manifest  fact?"  Bank  stock 
immediately  declined  from  125|  to  120.2  Biddle  consoled 
himself  with  the  belief  that  it  was  "  a  measure  emanating 
exclusively  from  the  President  in  person,  being  the  remains 
of  old  notions  of  constitutionality, —  that  it  is  not  a  cabinet 
measure  nor  a  party  measure,"3  and  finally  that  on  the 
whole  the  attack  would  "rather  benefit"  the  bank.4  His 
opinion  as  to  the  president's  sole  responsibility  for  the  act 
was  correct;  the  moment  at  which  the  bank  question  was  to 
be  a  party  one  was  still  far  in  the  future.  But  he  was  mis- 
taken in  laying  all  the  stress  upon  the  president's  constitu- 
tional opinions.  Jackson's  own  words  show  that  he 
considered  the  social  reasons  as  at  least  equally  important.5 
In  making  public  his  objections  to  the  bank  Jackson  is 
not  to  be  censured.  His  act  was  not  the  result  of  the  Ports- 
mouth quarrel,  for  it  had  been  determined  upon  before  that 
episode ;  nor  did  it  spring  from  the  belief  that  the  bank  was 
opposed  to  him  politically,  for  he  had  been  persuaded  that 
this  was  not  the  case.  He  was  convinced  that  the  bank  was 
unconstitutional  and  dangerous  to  republican  institutions, 

iTo  Biddle,  Dec.  11,  1829,  B.  P.  What  Jackson  meant  by  a  uniform  currency 
may  be  inferred  from  a  clause  in  his  farewell  address :  "  The  corporations  which 
create  the  paper  money  can  not  be  relied  upon  to  keep  the  circulating  medium  uni- 
form in  amount."—  Messages  and  Papers,  Vol.  Ill,  p.  301.  There  never  was  and  never 
will  be  such  uniformity.  He  may  have  meant,  however,  that  the  bank's  notes  were 
depreciated  when  distant  from  the  place  where  they  were  made  payable  ;  or  he  may 
have  meant  the  purchase  of  bills  and  selling  drafts  at  any  rate  but  par.  Gallatin  was 
inclined  to  the  opinion  that  he  referred  to  the  selling  of  drafts  for  a  premium. 
Qallatin  had  asked  an  explanation  from  the  president,  but  Jackson  apparently  did 
not  know  what  he  meant. —  Gallatin  to  Biddle,  Aug.  14, 1830,  ADAMS,  GallatMs  Writ- 
ings, Vol.  II,  p.  438. 

2  NILES,  Vol.  XXXVII,  p.  275. 

3 To  George  Hoffman,  of  Baltimore,  Dec.  15, 1829,  P.  L.  B.,  Vol.  Ill,  p.  106. 

*For  two  reasons:  (1)  because  the  objection  that  the  currency  was  not  sound 
and  uniform  was  known  by  everyone  to  be  unfounded;  and  (2)  because  the  substi- 
tute proposed  would  terrify  everyone.  On  the  whole,  Biddle  was  correct  in  his  judg- 
ment.—To  John  McKim,  Jr.,  of  Baltimore,  Jan.  18, 1830,  ibid.,  p.  141. 

8  "  I  was  aware  the  bank  question  would  bo  disapproved  by  all  the  sordid  and 
interested  who  prize  self-interest  more  than  the  perpetuity  of  our  liberty,  and  the 

blessings  of  a  free  republican  government I  could  not  shrink  from  a  duty  so 

imperious  to  the  safety  and  purity  of  our  free  institutions  as  I  considered  this  to 
be."— Jackson  to  J.  A.  Hamilton,  Dec.  19, 1829,  Reminiscences,  p.  151. 


196  THE  SECOND  BANK  OP  THE  UNITED  STATES 

and  therefore  he  only  fulfilled  his  duty  by  speaking  out.  If 
criticism  is  to  be  offered  at  all,  it  must  be  directed  against 
his  presumption  in  daring  to  dictate  while  he  was  completely 
ignorant  of  banking  and  monetary  affairs.  Nevertheless,  he 
was  fair  to  the  bank,  willing  to  hear  reason,  willing  to  con- 
sult the  opinions  of  Lewis,  Hamilton,  and  Nicholas  Biddle, 
as  well  as  those  of  Hill,  Taney,  and  Amos  Kendall.1 

It  is  important  to  remember  that  Jackson's  hostility  was 
not  so  much  to  a  national  bank  as  "to  the  bank  as  organ- 
ized," to  a  bank  with  exclusive  privileges  in  which  the  whole 
people  could  not  share.  He  was  convinced  that  some  form 
of  a  bank  was  convenient,  and  perhaps  necessary  for  carrying 
on  the  financial  operations  of  the  government,  and  in  this 
message  he  argued  for  one  with  provisions  which  would  not 
conflict  with  the  constitution  as  he  understood  the  constitu- 
tion. It  was  difficult  to  comprehend  just  what  he  meant, 
and  it  is  evident  that  he  was  not  settled  in  his  own  mind  as 
to  the  precise  nature  of  the  bank  he  wanted.  Writing  to 
Hamilton  in  December,  1829,  he  requested  him  to  outline 
two  plans — the  first  to  be  that  of  a  "  bank  of  deposit  for  the 
facility  of  the  transfer  of  public  moneys  and  the  establish- 
ment of  a  sound  and  uniform  currency,  making,  if  you  please, 
the  Custom-house  a  branch  to  this  National  Bank,  and 
attaching  it  to  the  Treasury  Department.  The  other  of  a 
mixed  character  which  may  fulfil  all  the  purposes  of  a  bank, 
and  be  free  from  the  infringement  of  State  rights  and  our 
Constitution." 2  Six  months  later  he  expresses  himself  some- 

i  James  A.  Hamilton  penned  the  phrases  in  the  first  message  in  opposition  to 
the  bank.  He  had  been  requested  by  Van  Buren,  Lewis,  and  others  to  come  to  Wash- 
ington and  tone  down  the  message,  especially  in  relation  to  the  bank.  The  original 
paragraph  on  the  bank,  he  says,  was  written  "  at  great  length  in  a  loose,  newspaper, 
slashing  style,"  fairly  good  evidence  that  it  came  from  the  pen  of  Jackson  himself  or 
possibly  Kendall,  Blair,  or  Hill.  Hamilton  attempted  to  persuade  the  president  to 
omit  the  paragraph  altogether,  but  the  president  declared  that  it  was  impossible, 
as  he  was  "  pledged  against  the  Bank."—  Hamilton  to  a  friend,  Dec.  28, 1829,  Remi- 
niscences, pp.  149, 150. 

»Dec.  19, 1829,  ibid.,  pp.  151, 152. 


ATTEMPTS  TO  SECURE  JACKSON'S  ASSENT     197 

what  more  decidedly:  "I  have  often  spoken  of  a  National 
Bank  chartered  upon  the  principles  of  the  checks  and  bal- 
ances of  our  Federal  Government,  with  a  branch  in  each 
State,  the  capital  apportioned  agreeably  to  representation, 
and  to  be  attached  to  and  made  subject  to  the  supervision  of 
the  Secretary  of  the  Treasury,  and  an  expose"  of  its  condition 
be  made  annually,  in  his  report  to  Congress,  as  part  of  the 
revenue;  which  might  be  a  bank  of  deposit  only."  If, 
however,  it  should  be  necessary  to  make  it  a  bank  of  dis- 
count and  issue  as  well,  "then  it  should  belong  to  the  nation 
exclusively,"  and  he  referred  to  the  Bank  of  the  State  of 
South  Carolina  as  the  model  for  such  an  institution.1  What 
he  preferred  then  was  a  purely  governmental  bank,  in  whose 
profits  all  the  people  should  share,  which  was  to  be  a  place 
of  deposit  only,  under  the  control  of  the  secretary  of  the 
treasury.  This,  he  thought,  would  obviate  all  difficulties, 
both  constitutional,  state,  and  social.  On  the  other  hand,  he 
was  not  absolutely  set  against  a  bank  of  deposit  and  issue,  but 
in  case  such  a  one  should  exist,  it  ought  to  be  on  the  model 
of  that  of  the  state  of  South  Carolina.  This  bank  was 
owned  completely  by  the  state;  its  president  and  directors 
were  annually  elected  by  the  legislature  in  joint  session;  it 
had  no  monopoly;  made  discounts,  dealt  in  exchange,  and 
issued  notes.2  The  feature  of  state  ownership  was  that  upon 
which  Jackson's  attention  was  fixed.  He  was  much  more 
inclined  to  the  first  plan,  however,  and  adopted  it  finally  as 
the  only  proper  one,  advocating  it  in  his  second  message  at 
considerable  length,  with  the  added  features  of  allowing  it 
to  deal  in  exchange  "based  on  government  and  individual 
deposits,"  transferring  the  government  funds  without  charge, 
with  no  stockholders,  no  capital  except  the  deposits,  and  no 

1  To  Hamilton,  June  3, 1830,  ibid.,  p.  167. 

2  Statutes  at  Large  of  South  Carolina,  24  ff .,  No.  2021.    The  dato  of  the  charter 
is  Dec.  19, 1812. 


198   THE  SECOND  BANK  OF  THE  UNITED  STATES 

property.1  The  details  were  not  thoroughly  worked  out,  but 
it  is  sufficiently  plain  that  Jackson's  bank  would  have  been 
something  like  the  present  sub-treasury  system,  with  the 
additional  features  of  the  privileges  of  trading  in  exchange 
and  of  receiving  the  deposits  of  private  individuals.2 

After  the  submission  of  the  message  to  Congress,  the 
parts  relating  to  the  bank  were  referred  in  the  Senate  to  the 
Committee  on  Finance  and  in  the  House  to  the  Committee  of 
Ways  and  Means.  Biddle  urged  the  latter  to  discuss  the 
message  and  recommend  a  re-charter.3  The  committee  acqui- 
esced, both  it  and  the  Senate  committee  reporting  at  length 
in  favor  of  the  bank.  McDuffie's  report  in  the  House  was 
exhaustive.  It  controverted  the  president's  reasoning  at  every 
point,  declared  that  the  bank  was  constitutional  and  expe- 
dient, that  it  had  "  actually  furnished  a  circulating  medium 
more  uniform  than  specie,11  and  contemptuously  condemned 
Jackson's  proposed  bank,  "founded  upon  the  credit  of  the 
Government  and  its  revenues,"  as  being  inefficient  and 
monstrous,  giving  to  the  government  "a  patronage"  "prodi- 
gious in  its  influence"  and  "dangerous  in  its  character," 
and  creating  a  centralizing  agency  of  enormous  potency.4  To 
refute  Jackson,  however,  was  not  to  convince  him,  and  the 
report  only  fixed  him  more  firmly  in  his  opinion:  "I  pre- 
sume it  to  be,"  he  wrote,  "  a  joint  effort,  and  the  best  that 
can  be  made  in  its  support,  and  it  is  feeble it  will 

1  Second  annual  message,  Messages  and  Papers,  Vol.  II,  pp.  528,  529.    See  also 
INGERSOLL,  Vol.  II,  pp.  283,  284,  where  Jackson  declares  this  "  the  only  safe  outline 
for  a  bank  or  government  deposite." 

2  Jackson  wrote  Lewis,  Jan.  1, 1842,  that  his  plan  did  not  contemplate  note  issues 
by  the  government.— SUMNER'S  Jackson  (revised),  pp.  286,  287,  quoting  Ford  manu- 
script letters  of  Jan.  1  and  Jan.  15,  1842.    The  wonder  is  that  anyone  should  ever 
have  supposed  that  Jackson's  plan  contemplated  note  issues.    The  Ford  manuscripts 
are  now  in  the  Lenox  collection  of  the  New  York  Public  Library. 

3  Biddle  to  Joseph  Hemphill,  Dec.  22,  1829,  P.  L.  B.,  Vol.  Ill,  p.  118.    Biddle  sup- 
plied the  facts  for  both  reports,  and  much  of  Smith's  report  is  word  for  word  as  he 
wrote  it  for  the  senator. 

*  Beport  of  April  13, 1830,  H.  R.  358,  21st  Cong.,  1st  Sess.,  pp.  14,  26, 27.  The  italics 
are  McDuffie's. 


ATTEMPTS  TO  SECURE  JACKSON'S  ASSENT     199 

not  go  unanswered  when  a  proper  time  arrives." '  He 
resented  the  committee's  interpretation  of  his  bank  plan.2 
That  the  report  had  aroused  his  temper,  and  that  he  had 
reverted  to  his  suspicions  of  the  bank's  corrupt  activity  in 
politics,  is  also  evident.  The  bank  was  "  the  present  hydra 
of  corruption,  so  dangerous  to  our  liberties  by  its  corrupt- 
ing influences  everywhere,  and  not  the  least  in  the  Congress 
of  the  Union." 3  His  determination  that  the  bank  should 
not  be  continued  in  the  form  in  which  it  existed  is  shown  in 
a  letter  of  June  26  to  Lewis,  wherein  he  censures  Duff  Green 
for  laxity  in  making  attacks  upon  the  bank,  and  asserts  that 
another  paper  must  be  founded  for  that  purpose.*  The 
Globe,  with  Blair  as  editor,  was  the  result. 

Biddle  himself  was  apprehensive  lest  Jackson  should  be 
irritated  by  the  reports  of  the  committees,  and  was  con- 
vinced that  conciliation  was  the  best  policy.5  He  adopted  a 
curious  method  of  conciliation.  With  remarkably  bad 
judgment,  he  proceeded  to  scatter  the  reports  from  one  end 
of  the  country  to  the  other  as  a  species  of  appeal  against  the 
president.  He  reprinted  thousands  of  copies  at  the  expense 
of  the  bank,  and,  as  if  this  were  not  sufficient,  he  sent  ex- 
tracts to  the  newspapers  so  as  to  give  them  wider  circulation. 
He  paid  for  the  printing  of  other  articles  as  well,  and  he 
secured  from  Grallatin  a  long  and  exhaustive  treatise  which 

1  Jackson  to  J.  A.  Hamilton,  May  3, 1830,  Reminiscences,  p.  164.  The  italics  are 
Jackson's. 

2" I  have  had  no  conversation  with  Mr.  McDuffie  on  the  subject  of  Banks;  nor 
never  did  I  contemplate  such  as  in  his  imagination  he  has  assumed,  and  recom- 
mended in  his  Report."— Jackson  to  Hamilton,  June  31, 1830,  ibid.,  p.  167. 

3  In  the  letter  of  June  3,  Jackson  shows  temper  by  mentioning  the  bank  on 
three  separate  occasions  as  the  "  hydra  of  corruption." — Ibid. 

*  "  The  truth  is,  he  [Duff  Green]  has  professed  to  me  to  be  heart  &  soul,  against 
the  Bank,  but  his  idol  [Calhoun]  controls  him  as  much  as  the  showman  does  his 
puppits,  and  we  must  get  another  organ  to  announce  the  policy,  &  defend  the 
administration,— in  his  hands  it  is  more  injured  than  by  all  the  opposition."— Wheel- 
ing, June  26, 1830,  SUMNEB'S  Jackson  (revised),  p.  206,  quoting  Ford  manuscripts. 

5  "  What  I  am  most  anxious  about  now,  is  that  the  President  himself  should  not 
feel  vexed  at  being  thus  contradicted."— To  Senator  S.  Smith,  April  22, 1830,  P.  L.  B., 
Vol.  Ill,  p.  227. 


200  THE  SECOND  BANK  OP  THE  UNITED  STATES 

took  the  president's  message  as  a  text.1  How  irritating  and 
offensive  all  this  was  to  Jackson  may  be  inferred  from  what 
he  had  already  said  about  McDuffie's  report. 

That  Jackson  would  "  persevere  in  his  opinion,  and  refuse 
to  sign  a  Bill,"  Biddle  could  not  believe.2  Lewis  remained 
cordial,  and  sagaciously  continued  to  furnish  good  advice 
and  the  names  of  Jackson  partisans  Hio  should  be  made 
directors  at  the  branches.3  Biddle  took  the  advice  and 
named  the  directors,  telling  Lewis  that  he  ought  to  be  sat- 
isfied, "  for  out  of  the  whole  Board  [at  Nashville]  a  very 
large  proportion  are  of  gentlemen  nominated  by  yourself."  * 
He  assured  Lewis  that  the  bank  entertained  kindly  feelings 
toward  the  president,  and  wished  to  know  if  the  rumors 
were  credible  that  the  president  had  declared  that  he  would 
veto  a  bank  bill.5  To  this  Lewis  replied: 

I  told  you  in  Philadelphia  when  you  first  mentioned  the  thing 
to  me,  that  there  must  be  some  mistake  because  the  report  was  at 
variance  with  what  /  had  heard  him  say  upon  the  subject.  In  con- 
versing with  him  a  few  days  ago  upon  the  subject  he  still  entertained 
the  opinion  that  a  national  Bank  might  be  established  that  would  be 
preferable  to  the  present  U.  S.  Bank;  but  that  if  Congress  thought 
differently,  and  it  was  deemed  necessary  to  have  such  a  Bank  as 
the  present,  with  certain  modifications  he  should  not  object  to  it.6 

This  letter  is  a  curious  commentary  upon  Jackson's  of 
June  3,  where  he  repeatedly  stigmatizes  the  bank  as  the 
"hydra  of  corruption,"  and  yet  it  is  not  necessarily  at 

1  Gallatin  to  Walsh,  April  27, 1830 ;  ADAMS,  Writings  of  Gallatin,  Vol.  II,  pp.  425-7. 
Biddle  furnished  Gallatin  with  the  necessary  documents  and  information  (ibid,, 
p.  429),  and  offered  to  pay  Gallatin  $1,000  for  the  work.— Gallatin  to  Biddle,  Dec.  8, 
1830,  ibid.,  pp.  443,  444.    Gallatin  refused  payment.    Biddle  also  sent  a  clerk  from 
the  bank  to  assist  in  making  digests,  etc. ;  sent  his  own  secretary  to  give  whatever 
assistance  needed ;  read  the  proof,  and  gave  advice.    In  many  particulars  the  article 
follows  the  statements  and  arguments  furnished  in  Biddle's  letters.    The  article 
appeared  in  the  American  Quarterly  Review  for  Nov.,  1830. 

2  Biddle  to  S.  Smith,  April  22, 1830,  P.  L.  B.,  Vol.  Ill,  p.  227. 

3  Biddle  to  Lewis,  Feb.  24,  1830,  ibid.,  p.  185 ;  Lewis  to  Biddle,  May  3,  1830,  and 
June  13, 1830,  B.  P. 

*  To  Lewis,  June  22, 1830,  P.  L.  B.,  Vol.  Ill,  p.  277. 

5  May  8, 1830,  ibid.,  p.  240.  «To  Biddle,  May  25, 1830,  confidential,  B.  P. 


ATTEMPTS  TO  SECURE  JACKSON'S  ASSENT     201 

variance  with  it.  Omit  the  temper  in  Jackson's  letter,  and 
there  is  no  difficulty  in  reconciling  the  two.  Provided  that 
Jackson  was  not  further  irritated,  Biddle  might  still  hope  to 
receive  his  consent  to  a  new,  though  modified,  charter. 

Biddle  immediately  wrote  to  Edward  Livingston,  asking 
him  to  have  a  conversation  with  the  president  on  the  sub- 
ject,1 and,  to  leave  no  stone  unturned,  he  instructed  President 
Nichol  of  the  Nashville  office  to  have  an  interview  with 
Jackson  during  the  president's  visit  to  Nashville  in  1830, 
and  attempt  to  convince  him  of  his  mistake  in  the  message 
of  1829.2  Nichol  did  not  neglect  his  instructions.  He 
reported  that  Jackson  appeared  "to  be  well  satisfied"  with 
the  bank's  management  in  transferring  the  funds  of  the  gov- 
ernment and  of  individuals,  and  admitted  that  "a  Bank 
such  as  the  present"  was  alone  capable  of  rendering  such 
facilities.  "The  only  objection  he  appears  to  have  to  the 
present  Bank  is  that  a  great  part  of  the  stock  is  held  by 
Foreighners —  consequently  the  interest  is  taken  from  the 
country  —  ....  and  I  am  well  convinced  that  he  will  not 
interfer  with  Congress  on  the  subject  of  renewing  the  char- 
ter of  the  Bank  altho'  on  this  subject  he  keeps  his  opinion 
to  himself." 3  All  this  was  reassuring,  though  Jackson  had 

i  May  27, 1830,  P.  L.  B.,  Vol.  Ill,  p.  256. 

?To  Josiah  Nichol,  June  22, 1830,  ibid.,  p.  275. 

3 "The  President  of  the  United  States  arrived  in  town  last  Tuesday  I  done 
myself  the  pleasure  of  waiting  on  him,  as  an  Old  friend  ....  during  his  stay  at  my 
house  I  had  frequent  opportunities,  and  did  not  neglect  the  subject  of  your  letter  — 
I  enforced  every  argument  that  I  could  make  bear  on  the  subject  — or  that  would  be 
of  any  service  in  removing  his  prejudices  —  ....  he  appears  to  be  well  satisfied 
with  the  facilities  that  the  Bank  has  given  to  Government  and  individuals  —  in 
transferring  their  funds  from  One  point  to  another  —  and  acknowledges  that  a  Bank 
such  as  the  present  only  can  do  so  —  he  appears  to  be  generally  pleased  with  the 
Management  of  the  Bank  of  the  United  States  and  Branches  —  and  particularly  so 
with  this  office.  I  have  taken  considerable  pains  and  gave  him  all  the  information  I 
consistently  could  on  Banking  subjects  — and  believe  have  convinced  him  that  the 
present  Bank  and  Branches  —  could  not  be  dispenced  with  without  manifest  injury 
to  the  Country  and  particularly  so  — to  this  Western  country  — as  no  other  currency 
could  be  substituted."  He  then  states  Jackson's  objection  to  foreign  stockholders, 
and  adds :  "  He  is  well  satisfied  that  Politicks  have  no  influence  in  Bank  or  in  the 
Choice  of  Directors."— Nichol  to  Biddle,  July  20, 1830,  B.  P. 


202  THE  SECOND  BANK  OF  THE  UNITED  STATES 

said  no  more  than  he  had  in  1829.  He  was  quite  capable  of 
keeping  his  own  counsel,  and  meanwhile  he  had  discovered 
a  new  objection  in  what  he  considered  the  loss  of  the  interest 
on  the  stock  held  by  foreigners.  Biddle  answered  imme- 
diately, refuting  at  length  this  supposed  objection,  and 
urging  Nichol  to  press  these  points  upon  the  president.1 

By  autumn  Biddle  had  recovered  mtfre  than  his  former 
confidence.  "  The  worthy  person  who  first  made  the  attack," 
he  assured  Grallatin,  "  looks  at  the  matter  now  with  different 
feelings."  His  advisers  "  studiously  disclaim  all  participa- 
tion" in  the  opinions  of  the  first  message;  both  houses  of 
Congress  are  favorable,  and  on  the  whole  it  seems  best  "  that 
the  Bank  should  apply  at  the  next  session  of  Congress  for  a 
renewal  of  its  charter." a 

Despite  this  robust  confidence,  Biddle  at  times  felt  appre- 
hensive that  something  was  amiss.  The  newspapers  sup- 
posed to  voice  the  sentiments  of  the  administration  showed 
ceaseless  hostility ;  in  May  resolutions  were  brought  into  the 
House  declaring  the  bank  unconstitutional,  asking  for  a  full 
report  on  its  affairs,  and  asserting  that  the  House  would  not 
consent  to  a  re-charter;  and,  though  these  were  voted  down 
by  large  majorities,3  they  were  ominous ;  at  Boston,  in  June, 
the  collector  of  the  port  attempted  to  remove  the  deposits 
from  the  branch  to  a  state  bank/  and  obscure  hints  con- 

iTo  J.  Nichol,  Aug.  3, 1830,  P.  L.  B.,  Vol.  Ill,  p.  314. 

2 "The  worthy  person  who  first  made  the  attack,  looks  at  the  matter  now  with 
different  feelings.  Those  about  him  studiously  disclaim  all  participation  in  the 
opinions  announced  by  him,  and  from  a  great  mass  of  observations  from  various 
quarters,  I  have  very  little  doubt  that  there  is  a  decided  majority  of  both  houses  of 
Congress  favorable  to  the  renewal  of  the  charter.  My  present  impression  is  there- 
fore ....  that  the  Bank  should  apply  at  the  next  session  of  Congress  for  a  renewal 
of  its  charter.  This  it  can  well  do  after  the  invitation  given  by  the  President  and  it 
is  I  think  of  great  importance  to  approach  the  question  before  it  becomes  involved 
in  the  controversy  for  the  Presidency."— To  Gallatin,  Sept.  9,  1830,  ibid.,  pp.  345,  346. 

3  Vote,  89  to  66,  May  10, 1830.— C.  D.,  Vol.  VI,  Part  II,  pp.  921,  922. 

*  "  The  Collector  at  Boston  has  transferred,  or  means  to  transfer,  the  collection 
of  his  Bonds  from  the  Branch  to  a  State  Bank." — Biddle  to  Dickins,  June  24, 1830, 
P.  L.  B.,  Vol.  Ill,  p.  281.  The  bonds  have  been  "  restored  by  order  of  the  Secretary," 
—Biddle  to  S.  Frothingham,  of  Boston,  Aug.  20, 1830,  ibid.,  p.  334. 


ATTEMPTS  TO  SECURE  JACKSON'S  ASSENT     203 

tinually  reached  Biddle  of  Jackson's  implacable  hostility,  and 
of  a  coalition  against  the  bank  between  Van  Buren  and  cer- 
tain Richmond  politicians.1 

Jackson's  second  message  disappointed  Biddle's  prevail- 
ing hopes  and  justified  his  occasional  fears.  It  declared 
that  nothing  had  "occurred  to  lessen  in  any  degree  the 
dangers  which  many  of  our  citizens  apprehend  from  that 
institution  as  at  present  organized,"  again  recommended  the 
creation  of  a  bank  "as  a  branch  of  the  Treasury  Depart- 
ment," which  should  obviate  constitutional  and  other  objec- 
tions, outlined  his  plan  at  length,  and  concluded  by  saying 
that  it  was  the  president's  object  to  call  "  the  attention  of 
Congress  to  the  possible  modifications  of  a  system  which 
cannot  continue  to  exist  in  its  present  form  without  occasional 
collisions  with  the  local  authorities  and  perpetual  apprehen- 
sions and  discontent  on  the  part  of  the  States  and  the  people." 2 
Jackson's  attitude  had  clearly  not  changed  in  the  slightest 
degree.  He  was  unalterably  opposed  to  the  bank  as  organ- 
ized, and  wanted  a  national  bank  of  another  model.  Repre- 
sentative men  of  his  own  party  were,  however,  convinced 
that,  if  he  was  once  persuaded  that  his  project  was  impos- 
sible, he  would  be  willing  to  sign  a  bill  re-chartering  the  old 
bank.3  His  message  allows  as  much  to  be  inferred,  since  it 
is  against  the  bank  "in  its  present  form"  that  his  oppo- 
sition is  directed.  Immediately  after  the  message  Lewis 
repeated  the  opinion  he  had  more  than  once  expressed>  that 
a  bill  to  re-charter  "with  certain  modifications"  would  re- 
ceive the  president's  assent.  What  these  modifications  were 
does  not  appear,  but  it  is  certain  that  somewhere  between 
the  president's  scheme  and  that  of  the  existing  bank  a  com- 

1  Biddle  to  James  Eobertson,  of  Eichmond,  Nov.  29, 1830,  ibid.,  p.  398. 

2  Messages  and  Papers,  Vol.  II,  pp.  528,  529,  Dec.  6, 1830. 

3  "  If  the  President  finds  that  his  scheme  is  not  likely  to  take,  I  do  not  believe  he 
will  be  opposed,  altogether,  to  the  present  Bank."—  Lewis  to  Biddle,  May  25, 1830, 
confidential,  B.  P.    Senator  S.  Smith  wrote  to  the  same  effect  on  Dec.  12,  ibid. 


204  THE  SECOND  BANK  OP  THE  UNITED  STATES 

promise  could  be  found.1  Nor  could  it  be  long  before  the 
president  would  surrender  his  plan,  for  it  met  with  no  en- 
couragement whatever  from  the  majority  of  his  own  party. 

Biddle,  however,  was  keenly  disappointed.  "  Well  what 
does  all  this  mean?"  he  queried;  "whose  attack  is  this?"8 
Meanwhile  the  presses  supporting  the  bank  treated  the  presi- 
dent's message  with  insolence  and  his  bank  plan  with  con- 
tempt. The  attacks  apparently  exhausted  the  patience  of 
both  Jackson  and  Van  Buren.  The  latter  declared  that 
"such  severity  of  animadversion  on  the  part  of  the  Bank 
was  felt  and  would  do  the  institution  much  injury,"  it  being 
taken  for  granted  that  the  attacks  emanated  from  the  bank.1 
"If  that  ground  be  taken,  the  Bank  must  fail,"  warned 
Senator  Smith  six  months  later.*  But  Biddle  would  not 
interfere  with  "the  freedom  of  the  press."  He  was  irri- 
tated, and  affected  to  have  "  not  the  slightest  fear  "  of  either 
General  Jackson  or  Martin  Van  Buren.  "  Our  countrymen 
are  not  naturally  disposed  to  cut  their  own  throats  to  please 
any  body,  and  I  have  so  perfect  a  reliance  on  the  spirit  and 
sense  of  the  nation,  that  I  think  we  can  defend  the  institu- 
tion from  much  stronger  enemies  than  they  are." '  Perhaps 
Nicholas  Biddle  had  never  read  Hamilton's  sagacious  saw 
that  "  men  are  reasoning  rather  than  reasonable  animals," 

l"I  gathered  from  a  conversation  with  Major  Lewis,  ....  that  altho'  the 
President  is  decidedly  in  favor  of  a  Bank  such  as  he  recommends  to  Congress,  yet  if 
a  bill  were  to  pass  both  houses,  renewing  the  charter  of  the  Bank  United  States 
with  certain  modifications,  the  President  would  not  withhold  his  approval  —  What 
the  modifications  were  I  conld  not  distinctly  understand ;  but  I  believe  that  the  prin- 
cipal one  was  to  take  from  the  Bank  the  right  of  establishing  branches  in  the  states, 
unless  with  the  consent  of  the  states." —  Cashier  R.  Smith  to  Biddle,  Washington, 
Dec.  13, 1830  confidential,  B.  P. 

2  To  S.  Smith,  Dec.  10, 1830,  P.  L.  B.,  Vol.  Ill,  p.  411. 

3  "  I  called  yesterday  on  the  Secretary  of  State,  and  found  him  very  sensitive  on 
the  last  publication  in  Webb's  paper  on  that  part  of  the  message,  which  related  to 
the  Bank,  he  said  that  such  severity  of  animadversion  on  the  part  of  the  Bank  was 
felt  and  would  do  the  institution  much  injury."    The  same  opinion  was  expressed 
by  the  Speaker,  and  the  general  impression  seemed  to  be  that  Biddle  was  respon- 
sible for  the  publications.—  Senator  S.  Smith  to  Biddle,  Dec.  19, 1830,  confidential,  B.  P. 

*  Smith  to  Biddle,  June  3, 1831,  ibid. 

5  To  Cashier  M.  Robinson,  of  New  York,  Dec.  20, 1830,  P.  L.  B.,  Vol.  Ill,  pp.  423, 424, 


ATTEMPTS  TO  SECURE  JACKSON'S  ASSENT     205 

or,  if  he  had,  he  had  not  bestowed  upon  it  the  reflection  it 
deserves.  Instead  of  moderating  the  ardor  and  the  wrath 
of  the  journalists,  Biddle  redoubled  his  exertions  to  influence 
public  opinion.  He  secured  letters  from  ex-Presidents 
Madison  and  Monroe,  expressing  opinions  favorable  to  the 
bank's  constitutionality  and  expediency;1  he  published 
floods  of  articles  at  the  bank's  expense:  reports  of  Smith 
and  McDuffie,  answers  to  Benton,  Gallatin's  treatise, 
speeches  of  congressmen,  and  the  opinions  of  less  distin- 
guished writers  on  finance  poured  forth  in  ever-increasing 
torrents. 

Meanwhile  Jackson's  partisans  were  not  idle.  The  Globe 
and  its  following  fulminated  against  the  bank  in  the  most 
violent  fashion.  The  charges  of  political  activity  at  the 
Kentucky  branches  were  renewed.  Wayne,  of  Georgia,  in 
the  House,  moved  to  refer  that  part  of  the  message  dealing 
with  the  bank  to  a  select  committee,  instead  of  to  the 
friendly  Committee  of  Ways  and  Means.  The  motion  was 
lost  by  a  vote  of  108  to  67.2  In  the  Senate  the  indefati- 
gable Benton  presented  a  resolution  against  the  renewal  of 
the  charter,3  for  the  purpose  of  creating  an  opportunity  to 
deliver  a  speech  which  should  arouse  "the  masses"  against 
the  bank.*  It  was  a  long,  involved  performance,  revealing 
abysmal  ignorance  of  banking  affairs,  but  not  the  less  effect- 
ive on  that  account,  since  "the  masses"  were  even  more 
ignorant  than  the  orator.  Moreover,  it  was  particularly 
strong  in  its  appeal  to  their  prejudices  against  exclusive 
privileges  which  made  "  the  rich  richer  and  the  poor  poorer." 

i  Biddle  to  C.  J.  Ingersoll,  Jan.  15, 1831,  ibid.,  p.  442;  Biddle  to  Silas  E.  Burrows, 
March  3, 1831,  ibid.,  p.  484.  Crawford  also  wrote  a  letter  in  support  of  the  bank.— To 
Ingersoll,  Dec.  5,  1831 ;  MILLEB,  Bench  and  Bar  of  Georgia,  Vol.  I,  pp.  242,  243,  and 
NILES,  Vol.  XLI,  p.  301.  For  letters  of  Madison,  of  Feb.  2  and  June  25, 1831,  see 
NILES,  Vol.  XL,  pp.  56, 357 ;  for  that  of  Monroe,  Jan.  20, 1831,  ibid.,  Vol.  XLI,  pp.  82  ff. 

a  C.  D.,  Vol.  VII,  pp.  350,  354.  «  Thirty  Tears,  Vol.  I,  pp.  187  ff. 

^  "  It  was  a  speech  to  be  read  by  the  people  —  the  masses  —  the  millions ;  and  was 
conceived  and  delivered  for  that  purpose." — Ibid.,  p.  204. 


206  THE  SECOND  BANK  OP  THE  UNITED  STATES 

The  motion  to  grant  leave  to  introduce  the  resolution  was 
lost  by  a  vote  of  23  to  20.1 

The  state  legislatures  were  also  called  upon  to  act.  In 
February  the  New  York  legislature  took  up  a  resolution 
against  re-charter.  Biddle  was  active  in  trying  to  thwart 
its  passage,  and  for  a  time  succeeded,  but  other  influences 
finally  preponderated  and  the  resolution  was  passed.2  Simul- 
taneously a  resolution  requesting  re-charter  was  brought 
into  the  legislature  of  Pennsylvania.  Biddle  urged  its 
adoption  and,  under  the  assiduous  lead  of  C.  J.  Ingersoll,  it 
was  carried  almost  unanimously.  It  declared  "that  the 
constitution  of  the  United  States  authorizes,  and  near  half 
a  century's  experience  sanctions,  a  Bank  of  the  United 
States  as  necessary  and  proper  to  regulate  the  value  of 
money  and  prevent  paper  currency  of  unequal  and  depre- 
ciated value." 3  The  two  great  states  were  thus  arrayed  in 
hostile  columns,  and  Jackson  was  warned  that  he  must  tread 
carefully  if  he  would  secure  the  support  of  both.  In  July 
the  Republican  members  of  the  New  Hampshire  legislature 
passed  a  resolution  "in  decided  opposition  to  re-chartering 
the  United  States  Bank."  *  The  same  month  the  secretary 
of  war  again  attempted  to  remove  a  part  of  the  pension 
fund,  this  time  to  a  bank  in  Albany,  N.  Y.,  which  was  the 
center  of  opposition  to  the  bank  in  that  state.5 

Biddle,  however,  now  understood  the  president's  position 
exactly,  and  had  determined  to  take  no  chances.  The  bill 
for  re-charter,  he  wrote,  must  not  be  brought  forward  at  the 
short  session  of  1831,  for,  if  it  were,  it  would  probably  be 
postponed. 

1  Thirty  Years,  Vol.  I,  p.  204. 

2  For  resolution  see  NILES,  Vol.  XL,  p.  114.    Biddle  believed  that  Van  Bnren  was 
responsible,  and  it  can  hardly  be  doubted  that  he  was  right.— Biddle  to  Nicholas 
Devereux,  Feb.  17, 1831.  P.  L.  B.,  Vol.  Ill,  p.  470. 

3  INGEKSOLL,  Vol.  II,  p.  268.     For  Ingersoll's  part  in  the  matter  the  Biddle 
Papers  are  authority.    For  the  resolutions  see  NILES,  Vol.  XL,  pp.  69,  73.    The  reso- 
lutions passed  unanimously  in  the  senate ;  in  the  house  by  75  votes  to  11. 

*  PARTON,  Vol.  Ill,  p.  384.  5  H.  R.  460,  22d  Cong.,  1st  Sess.,  pp.  481-9. 


ATTEMPTS  TO  SECURE  RE-CHARTEB          207 

Once  brought  forward  and  postponed,  it  would  of  course  be 
blended  up  with  the  election,  and  become  one  of  those  political 
matters  judged  exclusively  by  party  considerations.  On  the  other 
hand  if  it  passed  through  both  Houses,  and  was  negatived  by  the 
Pres't,  from  that  time  forward  it  would  become  a  question 
between  the  Bank  and  him,  and  if  he  were  re-elected,  he  would 
construe  it  as  a  decision  by  the  nation  against  the  Bank,  and  act 
accordingly.1 

Shrewd  calculation  could  not  possibly  analyze  a  political 
situation  more  accurately,  and  it  would  have  been  well  if 
Biddle  had  never  forgotten  his  own  wisdom.  To  avoid 
blending  the  question  with  the  election,  to  hinder  its 
becoming  "  one  of  those  political  matters  judged  exclusively 
by  party  considerations"  —  these  were  the  guide-posts  to 
success.  Nor  could  inspiration  itself  foretell  more  precisely 
the  result  of  a  failure  to  remain  true  to  these  precepts;  the 
question  would  become  one  between  Jackson  and  the  bank, 
and  if  re-elected  "  he  would  construe  it  as  a  decision  by  the 
nation  against  the  Bank,  and  act  accordingly." 

In  January  Biddle  was  certain  "  that  the  President  aims 
at  the  destruction  of  the  Bank ;" 2  in  February  he  was  almost 
convinced  that  they  must  fight ; 3  in  March  he  was  utterly  at 
sea  as  to  the  president's  position  ;  *  in  April  and  May  all  his 
hopes  flashed  up  once  more,  for  the  cabinet  had  gone  to 
pieces  and  the  change  substituted  "an  avowed  friend  Mr. 
Livingston,  for  a  decided  enemy  in  Mr.  Van  Buren.  The  new 
Secretary  of  the  Treasury  is  also  a  known  friend.'"  The 

1  Biddle  to  Joseph  Hemphill,  Dec.  14, 1830,  P.  L.  B.,  Vol.  Ill,  p.  414. 

2 To  Jonathan  Roberts,  Jan.  15, 1831,  ibid.,  p.  444. 

s  "  The  President  has  assailed  it,  his  partizans,  those  who  claim  to  be  his  special 
friends,  unite  in  this  denunciation  —  they  wish  to  force  it  into  a  question  between 
the  ascendancy  of  General  Jackson  and  the  destruction  of  the  Bank  —  and  it  is  to 
be  feared  that  they  may  succeed."— To  Nicholas  Devereux,  Feb.  17, 1831,  ibid.,  p.  470. 

*  "  On  the  subject  of  the  determination  of  the  President  towards  the  Bank,  I  have 
heard  so  much  &  such  various  opinions  that  I  have  ended  by  knowing  nothing." — 
To  Leslie  Coombs,  of  Lexington,  Ky.,  March  23, 1831,  ibid.,  p.  496. 

5  To  J.  Hunter,  of  Savannah,  May  4, 1831,  ibid.,  p.  514.  It  was  even  believed  that 
the  change  in  the  cabinet  resulted  in  part  from  a  change  in  the  president's  opinions 
about  the  bank.  Justice  Johnson  of  the  Supreme  Court  assured  Biddle  "  that  the 


208  THE  SECOND  BANK  or  THE  UNITED  STATES 

hopes  were  justified.  The  head  of  the  bank  immediately 
put  himself  in  touch  with  the  two  secretaries,  and  was  soon 
assured  of  their  assistance.  He  was  now  sanguine  of  suc- 
cess, and  on  September  2  the  stockholders  in  their  trien- 
nial meeting  authorized  the  president  and  directors  "to 
apply  to  congress  for  a  renewal  of  the  charter  of  the  bank" 
at  any  time  within  the  three  years  next  succeeding.1  Con- 
gressmen who  were  directors  at  the  bank  or  its  offices  were 
left  off  the  boards.2 

The  two  secretaries,  acting  in  conjunction  with  Biddle, 
exerted  their  powers  to  produce  a  change  of  sentiment  in 
their  stubborn  chief,  and  with  excellent  success.  Convinced 
that  his  own  plan  could  not  succeed,  Jackson  prepared  to 
accept  the  alternative  of  the  old  bank  with  a  modified  char- 
ter. Livingston  and  McLane  then  argued  that  he  ought  not 
to  mention  the  subject  in  his  next  message.  Jackson  agreed 
even  to  this,  "tho'  reluctantly."  Biddle,  however,  on  learn- 
ing of  this  decision,  declared  that  he  considered  it  better  for 
the  bank  that  the  president  should  speak,  "that  his  silence 
would  not  be  so  useful  as  his  mentioning  the  subject,"  and 
suggested  that  he  should  say  that  he  now  left  the  matter 
entirely  "with  the  representatives  of  the  people."  Biddle 
also  urged  McLane  to  recommend  a  re-charter  in  his  report 
of  1831.  At  first  McLane  thought  he  could  not  go  so  far, 
but  finally  acquiesced,  and  in  the  presence  of  Livingston 
informed  the  president  that  in  his  report  as  secretary  of  the 
treasury  he  would  advocate  a  re-charter  "in  the  strongest 
manner  he  could."  Jackson  "made  no  objection  whatever," 
and  also  consented  to  mention  the  bank  in  the  message  in  the 
manner  which  had  been  suggested  by  Biddle.  The  secretary 

Bank  have  nothing  to  apprehend  from  the  present  Cabinet,  nay  there  is  much  reason 
to  think  that  a  leading  object  of  the  change,  was  a  change  of  Policy  on  several 
Points  on  which  more  correct  Information  has  been  elicited." — W.  Johnson  to  B. 
Smith  for  Nicholas  Biddle  ;  R.  Smith  to  Biddle,  Washington,  Aug.  9, 1831,  B.  P. 

1  NILES,  Vol.  XLI,  p.  119. 

a  Biddle  to  N.  Silsbee,  Nov.  21, 1831,  P.  L.  £.,  Vol.  IV,  p.  4L 


ATTEMPTS  TO  SECURE  RE-CHARTER          209 

then,  "with  a  view  to  show  the  Pres't  the  full  extent  to 
which  his  report  might  lead,"  pointed  out  the  possibility 
that  the  Committee  of  Ways  and  Means  might  choose  to  act 
upon  the  report,  and  immediately  bring  in  a  bill  to  re-charter, 
which  he,  McLane,  could  not  oppose.  The  president  answered 
only  that  "  he  would  be  sorry  if  the  question  were  forced 
upon  him  in  that  way."  After  this  interview  with  Jackson, 
McLane  went  to  Philadelphia  to  talk  over  the  prospects  of 
the  bank  with  its  president.  Biddle  showed  anxiety  about 
the  forthcoming  message,  and  insisted  that  the  president 
must  not  express  " a  shade  of  opinion"  against  the  bank,  "or 
any  declaration  that  having  once  expressed  his  views  and 
having  no  reason  to  change  them,  he  would  now  leave  it  to 
Congress."  McLane  assured  Biddle  that  "  no  such  expres- 
sion could  or  should  be  introduced."  Jackson's  position  was 
discussed,  and  the  secretary  said  that  the  bank  should  wait 
until  after  the  election  before  petitioning  for  re-cnarter,  for 
if  the  measure  were  brought  forward  earlier,  the  president 
would  consider  it  a  defiance  and  act  accordingly.  "  On  the 
other  hand,  if  given  time  the  President  would  probably 
acquiesce  in  a  re-charter."  That  this  was  Livingston's 
opinion  is  also  well  known.1  Some  conversation  respecting 
the  details  of  the  bill  then  followed,  and  the  two  men  parted 
with  mutual  satisfaction.2 

1  Livingston  said  "  that,  at  this  stage  of  the  conflict,  the  President  was  really 
disposed  to  cease  the  war  upon  the  bank." — PAETON,  Vol.  Ill,  p.  395. 

2  "  About  ten  o'clock  to-day  Mr.  McLane  Secretary  of  the  Treasury  called  to  see 
me  at  the  Bank.    He  had  come  to  Philadelphia  principally  for  the  purpose  of  con- 
versing with  me  after  he  had  seen  the  President. 

"  He  now  stated  that  he  had  seen  the  President,  and  explained  to  him  the  course 
which  he  proposed  to  pursue  in  regard  to  the  Bank.  He  had  done  this  in  order  that 
there  might  be  no  misapprehension  on  the  part  of  the  President  of  his  views  and  the 
consequences  which  might  result  from  what  he  proposed  to  say  in  his  report. 

"  He  said  to  the  President  that  he  thought  the  act  of  Congress  which  directed 
the  Secretary  of  the  Treasury  to  report  annually  to  Congress  made  it  the  duty  of 
that  officer  to  present  his  own  views  and  on  his  own  responsibility  and  that  the 
Executive  stood  rather  in  the  light  of  a  moderator  between  him  (the  Secretary)  and 
the  Legislature.  That  such  had  always  been  the  construction  of  the  powers  of  the 
Secretaries.  (This  was  obviously  an  infusion  by  Mr.  Dickins  to  whom  I  left  a 
volume  with  all  the  passages  marked  which  I  thought  might  encourage  this  opinion.) 


210  THE  SECOND  BANK  OP  THE  UNITED  STATES 

At  last  the  bank  seemed  to  be  nearing  the  goal  it  had 
long  striven  to  reach  —  a  re-charter  with  the  assent  of  the 
president.  Biddle,  Livingston,  McLane  and  Jackson  now 
acted  under  a  sort  of  informal  compact:  the  secretaries  to 
work  for  re-charter,  Jackson  to  remain  quiescent  for  the 
present,  but  to  sign  a  bill  in  the  long  run  if  his  wishes  were 
met,  and  the  bank  on  its  part  to  wait  until  after  the  election 
before,  presenting  its  petition  for  a  charter,  and  to  accept 
the  modifications  desired  by  the  president. 

He  proceeded  to  explain  to  the  President  what  his  intentions  were.  He  means  to  speak 
of  the  power  of  the  Government  to  pay  off  the  whole  of  the  debt  on  the  3d  of  March  1833 
with  the  aid  of  the  Bank  stock  —  that  this  stock  if  sold  out  would  occasion  alarm  in  the 
country  and  the  panic  would  sink  its  value  —  whereas  he  was  satisfied  that  the  Bank 
would  take  it  at  a  reasonable  price,  not  less  certainly  than  eight  millions.  This  would 
give  him  an  opportunity  of  speaking  of  the  Bank  in  the  most  favorable  manner, 
recommending  the  continuance  of  the  charter  of  the  present  Bank  in  preference  to  a 
new  one,  with  such  modifications  as  without  injuring  the  institution  might  be  use- 
ful to  the  country  and  acceptable  to  the  Executive.  This  he  meant  to  present  in  the 
strongest  manner  he  could  to  Congress.  All  this  he  explained  particularly  to  the 
President  who  made  no  objection  whatever.  For  greater  precision  he  had  put  down 
the  heads  of  what  he  meant  to  say  in  his  report  and  showed  them  to  the  President. 
Mr.  Livingston  by  request  of  Mr.  McLane  was  present  at  this  meeting. 

"  It  had  been  previously  understood  between  Mr.  Livingston  and  Mr.  McLane 
that  the  President  should  say  nothing  in  the  message  about  the  Bank.  The  Presi- 
dent had  acquiesced  tho'  reluctantly  in  this,  because  he  thought  he  could  not  well 
be  silent  with  consistency.  But  in  my  conversations  with  him  Mr.  McLane  I  had 
expressed  the  opinion  that  his  silence  would  not  so  be  useful  as  his  mentioning  the 
subject.  The  matter  was  therefore  renewed  with  Messrs.  Livingston  and  McLane 
and  the  Pres't  and  it  was  resolved  that  he  should  introduce  the  subject  in  this  way 
—  that  having  on  former  occasions  brought  the  question  before  Congress  it  was  now 
left  with  the  representatives  of  the  people. 

"  Mr.  McLane  with  a  view  to  show  the  Pres't  the  full  extent  to  which  his  report 
migh't  lead,  said  that  perhaps  when  his  report  was  presented  and  referred  to  the 
Committee  of  Ways  and  Means  Mr.  McDuffie  in  his  present  mode  of  thinking  in 
regard  to  the  Bank  might  choose  to  introduce  a  bill  into  Congress  for  continuing  the 
charter  and  if  so  he  (Mr.  McLane)  could  not  with  the  views  which  he  entertained 
of  the  Bank  make  any  opposition  to  it.  The  President  said  he  would  be  sorry  if  the 
question  were  forced  upon  him  in  that  way. 

"  I  said  it  would  be  necessary  to  scan  very  accurately  the  Pres's  speech  so  that 
there  might  not  be  a  shade  of  opinion  expressed  against  it,  or  any  declaration  that 
having  once  expressed  his  views  and  having  no  reason  to  change  them,  he  would 
now  leave  it  to  Congress  &c.  Mr.  McLane  said  certainly  no  such  expression  could 
or  should  be  introduced,  as  it  would  not  be  in  harmony  or  consistency  with  his  own 
report. 

"  Mr.  McLane  said  that  he  would  be  willing  to  charter  the  Bank  without  any 
bonus  — but  intimated  that  he  thought  a  large  bonus  would  be  required,  and  said 
that  this  should  be  considered  in  our  proposed  purchase  of  Bank  stock. 

"  Ho  said  that  he  thought  the  greatest  danger  of  the  Bank  was  from  those  who 
wished  to  pull  down  this  Bank  in  order  to  build  up  another.  That  a  Mr.  West  of 


ATTEMPTS  TO  SECURE  KE-OHARTEB          211 

These  modifications  are  not  known  certainly,  but  may  be 
inferred  from  what  Jackson  afterward  wished.  The  govern- 
ment was  to  cease  holding  stock  in  the  bank,  as  may  be 
seen  from  Biddle's  memorandum  and  from  his  correspondence 
with  the  secretary.  The  bank  would  take  the  stock  and 
thus  assist  the  government  in  paying  off  the  national  debt, 
as  suggested  by  Biddle  to  Jackson  in  1829.1  The  bank's 

Salem  had  been  very  pressing  on  that  point.  I  said  there  were  I  believed  some  capi- 
talists in  Boston  and  New  York  who  were  anxious  about  it  —  but  I  thought  they  had 
little  political  weight.  He  said  that  the  argument  was  that  to  continue  it  would  be 
a  monopoly. 

"  In  regard  to  the  period  of  applying  for  the  renewal,  he  does  not  wish  to  be 
considered  as  the  adviser  of  the  Bank  because  it  might  be  imputed  to  him  that  he 
was  acting  in  concert  with  the  institution — but  he  renewed  the  opinion  which  he 
expressed  at  Washington  that  it  was  doubtful  (indeed  he  seemed  to  be  more  inclined 
now  to  think  it  inexpedient)  whether  it  would  be  expedient  to  apply  this  year. 
His  idea  was  that  if  it  were  put  to  the  President  as  a  test,  he  would  be  more  dis- 
posed to  reject  it  on  that  very  account.  The  President  is  now  perfectly  confident  of 
his  election  —  the  only  question  is  the  greater  or  less  majority  —  but  he  is  sure  of 
success  and  wishes  to  succeed  by  a  greater  vote  than  at  the  first  election.  If  there- 
fore while  he  is  so  confident  of  reelection  this  question  is  put  to  him  as  one  affecting 
his  reelection  he  might  on  that  account  be  disposed  to  put  his  veto  on  it,  if  he  be  as 
it  were  dared  to  do  it.  For  what  I  see  says  Mr.  McLane  of  the  character  of  General 
Jackson  I  think  he  would  be  more  disposed  to  yield  when  he  is  strong  than  when  he 
is  in  danger. 

"  The  footing  then  on  which  the  matter  now  stands  is  this : 

"  The  President  is  to  say  that  having  previously  brought  the  subject  to  Congress 
he  now  leaves  it  with  them. 

"  The  Secretary  is  to  recommend  the  renewal. 

"  This  latter  point  pleases  me  much.  When  I  saw  him  at  Washington  he  did  not 
think  he  could  go  so  far  as  to  originate  a  recommendation  of  the  Bank  and  I  therefore 
examined  all  the  reports  of  all  the  Secretaries  to  show  that  the  proposals  for  the 
Banks  all  originated  with  them  —  and  I  left  the  volumes  of  these  reports  in  Mr. 
Dickins's  hands  marked,  so  that  he  might  urge  them  on  the  Secretary's  attention. 

"  He  thinks  he  can  present  the  tariff  question  strongly  —  he  will  then  press  with 
equal  strength  the  Bank  question  and  if  he  can  arrange  the  question  of  the  public 
lands  (the  surrender  to  them  of  the  lands  within  their  limits  at  a  certain  price  so  as 
to  make  the  landholding  states  pay  in  stock  to  the  old  States  the  proportion  which 
the  latter  have  a  right  to  —  the  Bank  would  be  put  in  such  good  company  and  on 
such  a  footing  that  even  Mr.  Benton  could  not  attack  it. 

"  On  his  way  to  Mr.  Carroll's  with  the  President  the  latter  adverted  to  the  incon- 
sistency of  those  who  pulled  down  the  old  Bank  to  build  up  the  new,  and  particu- 
larly of  the  objection  then  made  that  foreigners  were  stockholders.  This  he 
considered  an  unfounded  objection.  (He  mentioned  this  to  me  at  Washington.)" — 
Memorandum  by  Biddle,  written  Oct.  19, 1831. 

This  interview  with  McLane  is  undoubtedly  that  referred  to  by  Weed  in 
his  Autobiography,  pp.  373-5.  The  account  in  Weed  is  evidently  inaccurate,  but, 
excepting  what  he  says  about  Webster  and  Clay,  may  be  reconciled  with  Biddle's 
memorandum. 

1  See  memorandum.  Also  Biddle  to  McLane,  Oct.  21, 1831,  offering  on  the  part 
of  the  bank  to  pay  at  least  $8,000,000  for  the  government  stock  in  the  bank. 


212  THE  SECOND  BANK  OP  THE  UNITED  STATES 

capacity  to  hold  real  estate  was  to  be  limited  and  the  number 
of  offices  in  any  state  fixed  at  not  more  than  two ;  the  permis- 
sion of  states  was  to  be  secured  before  establishing  offices; 
all  the  bank's  notes  were  to  be  issued  from  the  parent  office, 
which  was  to  be  permitted  to  have  two  officers  whose 
sole  business  should  be  the  signing  of  the  notes,  and  the 
states  were  to  be  allowed  to  tax  the  branches.1  There  was 
nothing  in  all  this  to  which  the  bank  might  not  well  agree.2 
The  president's  message  in  1831  spoke  of  the  bank  in 
terms  which  its  dismayed  enemies  considered  indicative  of 
a  change  on  the  part  of  the  president,  or  at  least  a  desire  to 
avoid  the  issue,  while  the  secretary's  favorable  report  created 
a  sensation.3  But  to  Biddle's  distress  McLane  had  been 
unable  to  fulfil  his  promise  that  the  president  should  not 

1  See  the  agreement  with  Livingston  in  chap,  x,  "The  Struggle  for  the  Charter." 
Shippen,  of  Louisville,  wrote  Biddle  that  he  had  seen  a  letter  from  the  presi- 
dent's private  secretary :   "  The  substance  of  the  letter  is,  that  the  Pres'dt  does  not 
consider  himself  pledged  against  a  renewal,  and  that  if  Congress  passes  a  Bill  with 
proper  modifications  of  the  charter  his  approval  will  not  be  withheld." 

Modifications:  (a)  no  more  than  two  branches  in  each  state;  (6)  bank  stock 
now  owned  by  government  to  be  sold  to  individuals;  (c)  limitation  of  capacity  of 
the  institution  to  hold  real  estate ;  (d)  take  away  power  to  loan  money  on  a  pledge 
of  merchandise ;  (e)  give  bank  power  to  appoint  two  officers  to  sign  notes,  and  all 
notes  to  issue  from  the  mother  bank;  (/)  existing  provisions  in  regard  to  govern- 
ment directors  and  deposits  to  remain ;  (g)  the  corporation  to  be  rendered  suable  in 
a  state.— Cashier  Shippen  to  Biddle,  Dec.  6, 1831,  B.  P. 

2  It  was,  of  course,  impossible  to  keep  the  agreement  with  the  administration 
entirely  secret,  and  rumors  respecting  it  were  soon  in  circulation.    "  The  Telegraph," 
says  Niles  (Vol.  XLI,  p.  325,  Dec.  31, 1831),  "  with  reference  to  the  report  of  the  secre- 
tary, asked  — '  But  what  will  Mr.  Ritchie  do  with  the  bank?    What  will  he  think  of 
this  "  admirable  state  paper,"  when  he  learns  that  a  bill  to  re-charter  the  bank,  the 
joint  production  of  the  treasury  and  of  the  bank,  had  already  received  the  sanction 
of  the  president,  before  the  message  was  transmitted  to  congress?'"    The  Globe 
hereupon  denied  the  report,  saying  that  it  was  authorized  to  do  so.    The  National 
Gazette  did  the  same  for  the  bank.    The  Telegraph  thereupon  explained  that  there 
had  been  a  misapprehension. — NILES,  ibid.,  and  footnote.    The  New  York  Enquirer 
declared  "  from  the  most  unquestionable  authority  "  that  Blair,  in  the  Globe,  did  not 
speak  with  the  authority  of  the  president.— Ibid.,  p.  338,  Jan.  7, 1832. 

3  "  The  annual  treasury  report  has  caused  much  speculation  and  remark 

The  '  Globe '  .  .  .  .  dissents  from  the  opinions  of  the  secretary  as  to  the  bank  of 
the  United  States,  and  they  seem  to  have  given  the  venerable  editor  of  the '  Richmond 
Enquirer '  the  horrors  —  but  the  strangely  moderated  tone  of  the  president's  message 
in  respect  to  that  institution,  ought  to  have  prepared  him  for  something." 

"  For  ourselves,  we  have  not  been  able  to  draw  a  long  breath  since  we  read  it ; 
and  cannot  pretend  to  say  what  we  think  of  it  until  we  have  recovered  a  little  from 
the  shock  of  surprise  which  it  gave  us." — Ibid.,  p.  281.  • 


ATTEMPTS  TO  SECURE  KE-CHABTEB          213 

declare  his  opinions  unchanged.  On  the  contrary,  Jackson 
asserted  that  he  still  entertained  "the  opinions  heretofore 
expressed  in  relation  to  the  Bank  as  at  present  organized," 
but  deemed  it  his  duty  "  to  leave  it  for  the  present  to  the 
investigation  of  an  enlightened  people  and  their  representa- 
tives." 1  This  to  Biddle  seemed  ominous,  but  he  expected 
too  much.  The  president's  remarks  should  not  have  dis- 
heartened him,  especially  as  Jackson  repeated  his  trite  "as 
at  present  organized."  The  arrangement  with  McLane  was 
that  there  should  be  modifications,  and  therefore  a  bank 
organized  in  a  different  manner  from  the  existing  one. 
Moreover,  it  appears  certain  that  Jackson  was  willing  to 
make  the  concessions  expected.  Writing  to  Hamilton  at 
this  time,  he  said  that  his  opinions  had  not  changed;  that 
he  and  McLane  did  not  differ,  as  some  supposed,  and  then 
added:  "Mr.  McLane  and  myself  understand  each  other, 
and  have  not  the  slightest  disagreement  about  the  prin- 
ciples, which  will  be  a  sine  qua  non  in  my  assent  to  a  bill 
rechartering  the  Bank." 2  This  sentence  can  only  mean 
that  Jackson  had  agreed  that  upon  certain  points  being  con- 
ceded he  would  assent  to  a  re-charter.  The  bank  might 
with  safety  have  continued  under  the  agreement  made  with 
McLane. 

But  Biddle  was  suspicious  and  distrustful.  Moreover, 
the  comments  of  the  administration  papers  dismayed  and 
disheartened  him.8  There  was  also  a  powerful  attempt  mak- 
ing to  establish  a  new  bank,  which  he  feared  would  receive 
Jackson's  support.  Finally  his  friends  among  the  National 
Republicans  were  assuring  him  that  it  was  only  in  conjunc- 

1  Messages  and  Papers,  Vol.  II,  p.  558,  Dec.  6, 1831. 

2  Dec.  12,  1831,  Reminiscences,  p.  234. 

3  "  The  style  of  the  paragraph  in  that  passage  about  the  Bank,  with  the  com- 
mentary of  the  Globe,  the  Richmond  Enquirer  and  the  Standard,  I  confess  shake 
my  confidence  much.    It  is  not  in  such  an  ambiguous  tone  that  a  President  should 
speak,  or  suffer  his  dependants  to  speak."— Biddle  to  Dickins,  Dec.  20, 1831,  P.  L.  B., 
Vol.  IV,  p.  60. 


214  THE  SECOND  BANK  OP  THE  UNITED  STATES 

tion  with  them  that  he  could  secure  a  re-charter,  and  urging 
that  now  was  the  only  time.  The  pressure  was  intense  from 
both  sides,  to  act  and  not  to  act,  and  his  hopes  and  fears 
haled  him  either  way.  Decision  was  necessary,  and  at  last 
he  made  it,  and  made  it  wrong.  He  chose  to  enter  into 
open  conflict  with  the  president,  and  the  bank  was  over- 
thrown as  a  consequence. 


CHAPTER  X 

THE  STRUGGLE  FOR  THE  CHARTER 

HENBY  CLAY  is  universally  regarded  as  responsible  for 
the  entrance  of  the  bank  into  the  political  arena  in  1832. 
This  opinion  is  mistaken  and  unjust.  Clay's  influence  was, 
of  course,  directed  to  this  end,  but  it  was  only  a  minor 
element  in  the  ultimate  decision.  Nicholas  Biddle  was  the 
responsible  actor,  and  he  was  not  the  man  to  be  forced  into 
any  course  of  action  which  he  did  not  approve. 

Clay's  position  is  easily  determinable.  He  had  early 
considered  the  advisability  of  bringing  the  bank  issue  for- 
ward. In  May,  1830,  he  expressed  the  opinion  that  it  was 
too  soon  to  decide  "on  the  question  of  the  renewal  of  the 
charter  "  In  August  he  had  "  great  doubts  of  the  expe- 
diency of  making  the  application  until  the  next  Presidential 
Contest "  was  decided,  and  thought  that  the  bank  ought  to 
avoid  mixing  "  the  two  questions."  2  In  September  he  con- 
sulted Biddle  on  the  subject,  and  the  latter  answered  that  he 
was  "satisfied  that  it  would  be  inexpedient,"  and  "that 
nothing  but  a  certainty  of  success  should  induce  an  appli- 
cation now." s  It  was  not  until  November,  1831,  that  Clay 
advised  "an  immediate  application  to  be  made,"  having 
changed  his  mind  about  the  necessity  of  waiting  until  after 
the  election.*  The  following  month  the  National  Repub- 

1  Clay  to  Francis  Brook,  May  23, 1830,  COLTON,  The  Private  Correspondence  of 
Henry  Clay,  p.  271. 

2  "  He  has  great  doubts  of  the  expediency  of  making  the  application  until  the 
next  Presidential  Contest  is  over,  and  thinks  that  the  Bank  ought  as  far  as  possible 
to  avoid  any  measures  which  would  have  a  tendency  to  mix  or  connect  the  two 
questions."    At  this  time  he  suspected  that  Jackson  wished  to  make  it  a  campaign 
issue.— J.  Harper  to  Biddle,  Lexington,  Aug.  20, 1830,  B.  P. 

3  Biddle  to  Clay,  Nov.  3, 1830,  Clay's  Correspondence,  p.  287. 

*  In  a  conversation  with  John  Tilford,  of  Lexington,  Clay  said  that  about  a 
year  before  he  thought  that  the  bank  should  wait  two  or  three  years  before  asking 

215 


216  THE  SECOND  BANK  OP  THE  UNITED  STATES 

licans  at  the  Baltimore  convention  placed  the  bank  in 
their  platform,  lauding  it  as  a  "  great  and  beneficial  institu- 
tion," which  Jackson  had  "gone  out  of  his  way  ....  to 
denounce  ....  as  a  sort  of  nuisance,"  upon  whose  "  imme- 
diate destruction"  he  was  intent.  He  was  "three  times 
over  pledged  ....  to  negative  any  bill  that  may  be  passed 
for  re-chartering  the  bank,"  and  would  in  all  probability 
attempt  to  replace  it  by  "  the  extraordinary  substitute  which 
he  has  repeatedly  proposed,"  and  which  would  bestow  upon 
the  executive  almost  despotic  power,  placing  in  his  hands 
"the  means  of  corruption  without  checks  or  bounds."  The 
National  Republicans  were  evidently  persuaded  that  Jack- 
son's position  could  be  seriously  shaken  by  injecting  the 
issue  into  the  campaign  ;  and  Clay,  as  the  leader  of  the 
party,  became  warmer  in  his  advocacy  of  this  maneuver. 
He  declared  that  Jackson  was  "playing  a  deep  game  to 
avoid,  at  this  session,  the  responsibility  of  any  decision  on 
the  Bank  question," 2  "  that  now  or  never,  was  the  time  to 
act  with  any  chance  of  success,"  and  that  "  the  declining  to 
memorialize"  might  be  considered  "as  an  electioneering 
step  against"  the  Clay  party.3  This  was  a  plain  hint  that 
the  bank  must  expect  no  aid  from  the  National  Republicans 

for  a  re-charter,  "but  that  he  now  thought  differently  and  would  advise  an  imme- 
diate, application  to  be  made  by  them." — Tilford  to  Biddle,  Lexington,  Nov.  11, 
1831,  B.  P. 

1  NILES,  Vol.  XLI,  p.  310. 

2  To  Francis  Brook,  Dec.  25, 1831,  Clay's  Correspondence,  p.  322. 

3  Clay  told  President  Smith  of  the  Washington  branch  that  "  he  had  heard  on 
good  authority"  that  Jackson  had  said  "  that  either  the  Bank  or  Andrew  Jackson 
must  go  down,"  but  Clay  thought  it  was  probable  that  he  would  sign  a  bill  passed 
before  the  election ;  but  after  that  Clay  "  did  not  doubt  his  rejecting  it— That  now 
or  never,  was  the  time  to  act  with  any  chance  of  success."    Smith  said  that  Jack- 
son's friends  would  consider  this  as  an  electioneering  step  on  the  part  of  the  bank 
against  him.    To  this  Clay  replied  that  "there  was  another  aspect  of  the  subject 
under  which  those  opposed  to  the  President,  and  in  general  friends  of  the  Bank, 
might  consider  the  delay  to  memorialize,  especially  after  the  action  of  the  stock- 
holders on  the  subject,  as  an  electioneering  step  against  them  ;  that  already  rumors 
of  a  coalition  to  this  effect  were  circulated." — President  S.  H.  Smith  to  Biddle, 
Washington,  Dec.  17, 1831,  B.  P. 


STRUGGLE  FOB  THE  CHARTER       217 

unless  it  was  willing  to  lend  mutual  assistance.1  Biddle  and 
Clay  do  not  seem  to  have  had  any  interview,  however  ;  and, 
in  response  to  a  letter  from  Clay,  Biddle  replied:  "Nothing 
is  yet  decided,  altho'  the  subject  is  under  serious  and 
anxious  consideration." a  Clay  was  not  in  Biddle's  secrets, 
for  he  knew  nothing  of  the  dealings  with  the  cabinet,8  and 
on  the  very  day  that  Biddle  wrote  the  foregoing  non-com- 
mittal letter  to  him  he  declared  to  another  correspondent: 
"My  own  individual  impression  is  that  such  an  application 
would  be  advisable,  and  it  is  at  this  moment  under  serious 
consideration."  * 

The  month  succeeding  President  Jackson's  third  annual 
message  was  the  most  critical  in  the  bank's  existence.  All 
through  that  month  Biddle  was  weighing  the  chances  for 
and  against,  expending  all  his  energy  and  intellect  in  sifting 
out  the  various  assurances  given  him,  interviewing  those 
best  informed,  taking  the  opinion  once  more  of  the  leaders 
in  the  cabinet,  and  finally  sending  to  Washington  his  con- 
fidential coadjutor,  General  Thomas  Cadwalader,  to  look 
over  the  ground  carefully  before  any  decision  was  made. 
During  all  this  time  he  never  exhibited  the  faintest  trace  of 
wavering  on  account  of  the  opinion  of  either  Clay  or 
Jackson  partisans,  unless  that  opinion  appealed  to  his  intel- 
lect as  sound  and  valid. 

The  man  among  the  National  Republicans  who  appar- 
ently had  most  influence  in  determining  Biddle's  decision 
was  John  Sergeant,  the  party's  candidate  for  vice-president, 
a  Philadelphian,  an  intimate  friend,  and  one  of  the  stand- 
ing counsel  of  the  bank,  whose  opinion  was  asked  in  every 

i '  It  is  said  that  Messrs  Clay  and  Webster  declared,  that  if  the  application  for 
the  Charter  was  not  made  at  the  present  session,  that  no  reliance  should  be  placed 
on  their  support  at  a  future  time." — Henry  Toland  to  Biddle,  March  13, 1832,  ibid. 

2  Dec.  22, 1831,  P.  L.  B.,  Vol.  IV,  p.  63. 

3 He  says  "already  rumors  of  a  coalition  to  this  effect  were  circulated"  (sea 
note  3,  p.  216;  a  remark  which  shows  that  he  knew  nothing  on  the  subject. 

*To  Nicholas  Devereux,  of  Utica,  Dec.  22, 1831,  ibid.,  p.  61. 


218  THE  SECOND  BANK  OP  THE  UNITED  STATES 

conjuncture  and  frequently  adopted.  Next  in  influence 
stood  Webster,  whose  relations  to  the  bank  were  precisely 
similar.  On  his  way  to  Washington,  in  the  autumn  of  1831, 
Webster  had  stopped  in  Philadelphia,  and  in  an  interview 
with  Biddle  had  pressed  upon  him  the  expediency  of  apply- 
ing immediately  for  a  re-charter,  in  opposition  to  the  wishes 
of  Jackson;  and  when  he  reached  the  capital  he  wrote 
saying  that  he  had  conversed  with  many  of  the  politicians 
there,  and  that  the  result  was  "  a  strong  confirmation  of  the 
opinion  which  I  expressed  at  Philadelphia  that  it  is  expe- 
dient for  the  Bank  to  apply  for  the  renewal  of  its  Charter 
without  delay." '  He  was  very  much  set  in  this  opinion. 
Cadwalader  assured  Biddle  that  some  of  the  members  of  the 
Clay  party  "would  be  lukewarm  or  perhaps  hostile,  if  we 
bend  to  the  Government  influence,"  and  significantly  added 
in  a  footnote,  "Webster  would  be  cold."2  Nevertheless,  if 
Biddle  chose  to  disregard  the  displeasure  of  his  friends,  one 
may  aver  confidently  that  the  party  could  not  oppose  the 
bank  on  principle  and  would  in  the  end  vote  for  it,  however 
reluctantly. 

But  the  question  which  tortured  him  incessantly  was: 
What  would  Jackson  do?  If  Biddle  could  have  received 
assurance  from  the  president  that  he  would  approve  a  bill 
for  a  modified  charter,  there  can  be  no  doubt  that  Biddle 
would  have  acted  in  union  with  him.  But  it  was  precisely 
this  assurance  which  he  could  not  procure,  although  Jackson's 
friends  were  confident  that  the  president  would  yield  in  the 
end,  and  absolutely  sure  that  he  would  not  sign  a  bill  now. 
Senator  Samuel  Smith  warmly  counseled  delay,  and  said  that 
he  was  "authorized"  by  McLane  to  say  that  it  was  "his 
deliberate  opinion  and  advice  that  a  renewal  of  the  Charter 

ought  not  to  be  pressed  during  the  present  session 

The  message  is  as  much  as  you  could  expect,"  he  continued. 

JTo  Biddle,  Dec.  18, 1831,  B.  P.  2  Dec.  25, 1831,  ibid. 


STRUGGLE  FOB  THE  CHARTEB  219 

"It  shows  that  the  Chief  is  wavering."  Time  would  set  him 
right,  and  all  of  the  cabinet  excepting  Taney  were  favorably 
disposed.1  Lewis's  advice  was  to  the  same  effect;2  and  this 
was,  indeed,  the  universal  opinion  of  the  Democratic  friends 
of  the  bank.3 

When,  therefore,  Cadwalader  went  to  Washington  as  the 
bank's  agent,  his  principal  object  was  to  discover  the  presi- 
dent's attitude.  He  had  first  of  all  "a  long  and  frank  con- 
versation with  Mr.  McLane,"  who  assured  him  "positively 
that  the  President"  would  "  reject  the  Bill  if  the  matter  is  agi- 
tated this  session.'11  The  bank  must  wait.*  No  one,  however, 
could  speak  authoritatively  for  the  president,  and  unless 
assurance  could  be  given  Biddle  was  disposed  to  act.  To 
Cadwalader  he  wrote: 

1  of  course  abstain   from  forming  any  definite  opinion,  but 
I  will  mention  to  you  exactly  my  present  state  of  mind.    If  Mr. 

i "  I  had  last  night  a  long  conversation  with  McLane,  and  I  am  authorized  by  him 
to  say,  that  it  is  his  deliberate  opinion  and  advice  that  a  renewal  of  the  Charter  ought 
not  to  be  pressed  during  the  present  session,  in  which  I  concur  most  sincerely— The 
message  is  as  much  as  you  could  expect.  It  shows  that  the  Chief  is  wavering.  If 
pressed  into  a  Corner  immediately,  neither  McLane  or  myself  will  answer  for  the 
consequences.  But  we  both  feel  confident  of  ultimate  success,  if  time  be  given  for 
the  P 1  to  convince  himself  of  the  Error  into  which  Opinion  long  formed,  (preju- 
dice if  you  please)  had  committed  him.  Every  day  new  converts  are  making 

Every  one  of  the  Cabinet  except  Taney  is  favorable." — Senator  Smith  to  Biddle,  Dec. 
7, 1831,  ibid. 

2  "  I  told  General  W.  that  Major  Lewis  had  spoken  very  freely  on  the  subject  of 
pressing  the  renewal  this  winter  —  that  if  the  friends  of  the  Bank  pressed  it  now,  it 
would  be  construed  as  an  act  of  coercion  on  him  —  that  the  President  was  not  a  man 
to  be  forced  into  any  measure,  and  would  be  more  likely  to  veto  the  bill  before  the 
election  than  afterwards,  as  in  the  one  case  his  signing  it  would  appear  to  be  the 
result  of  fear,  and  in  the  other,  of  choice  —  and  that  General  Jackson  was  not  a  man 
to  be  forced  in  any  thing." — R.  Smith  to  Biddle,  Washington,  Dec.  14, 1831,  private 
and  confidential,  ibid. 

3  BENTON,  Thirty  Years,  Vol.  I,  p.  227. 

*  "  I  have  had  this  morning  a  long  and  frank  conversation  with  Mr.  McLane.  He 
says  positively  that  the  President  will  reject  the  Bill  if  the  matter  is  agitated  this  ses- 
sion. He  (the  Pres't)  and  those  about  him  would  regard  the  movement,  before 
the  election,  as  an  act  of  hostility  —  or  as  founded  on  the  idea  that  his  opinions 
would  bend  to  present  views  —  and  that  his  fears  would  induce  him  to  truckle  —  Mr. 
McL.  is  sure  that  under  such  circumstances  he  would  apply  his  veto, —  even  if  cer- 
tain that  he  would  thereby  lose  his  election.  The  question  he  says  cannot  now  be 
started  without  being  regarded  as  a  party  one." — Cadwalader  to  Biddle,  Washing- 
ton, Dec.  21, 1831,  B.  P. 


220  THE  SECOND  BANK  OP  THE  UNITED  STATES 

McDuffie  could  insure  a  reference  to  the  Committee  of  Ways 
and  Means,  and  a  favorable  report  of  that  Committee  I  would  not 
hesitate  to  try  it,  if  I  could  rely  on  a  majority  of  one  only  in  each 
house.1 

Cadwalader  agreed,  and  said  that  "  McDuffie  leans  in  favor 
of  going  it  now,"  but  both  McDuffie  and  he  thought  "it 
best  not  to  decide  until  after  a  conference  with  McLane 
and  Smith." a  The  question  then  was  to  be  decided  after  tak- 
ing the  opinions  of  three  Democrats — McDuffie,  Smith,  and 
McLane — one  for  and  two  against  immediate  application. 
The  introduction  of  McDuffie' s  name  into  the  correspond- 
ence between  Biddle  and  Cadwalader  is  significant.  It  was 
he,  and  not  Clay,  who  took  the  principal  part  in  bringing 
the  bank  into  the  field.  It  was  his  advice  that  was  asked 
and  followed.  As  chairman  of  the  Committee  of  Ways  and 
Means,  as  a  Calhoun  man,  and  as  the  leader  of  the  very  few 
representatives  from  South  Carolina  in  favor  of  the  bank,  his 
support  was  not  less  important  than  that  of  Webster  or  that 
of  Clay,  and  had  he  at  any  moment  advised  delay,  delay 
would  have  followed.  He  was  positive,  however,  that 
now  was  the  time.  On  the  29th  Cadwalader  wrote  that 
McDuffie  and  he  were  convinced  that  the  bank  must  act. 
He  was  sure  that  the  president  would  "never  sign"  and  that 
it  was  advisable  to  put  the  question  before  the  people  in 
order  that  the  country  might  get  to  the  point  where  a  two- 
thirds  majority  of  Congress  might  be  had.  McDuffie  and  he 
had  listened  to  McLane's  arguments  and  thought  nothing  of 
them.3  The  conference  between  the  four  men  changed  in  no 
respect  the  opinion  of  the  two  in  whose  hands  was  the  ulti- 
mate decision.  Biddle  was  equally  certain  that  the  time  had 

i  To  Cadwalader,  Dec.  24, 1831,  B.  P.  2  To  Biddle,  Dec.  25, 1831,  ibid. 

3  "The  President  would  be  at  least  as  likely  to  sign  now,  as  at  any  future  time, 
though  all  the  information  I  have  got  leads  me  to  the  belief  that  he  will  never  sign." 

"  McDuffie  insists  that  now  is  the  time.  If  you  delay  a  session  you  might  as  well  lie 
down.  McDuffie  and  I  have  heard  McLane's  talk  and  think  nothing  of  it."  He  thinks 
if  a  veto  is  certain,  that  it  is  desirable  now  in  order  that  the  people  may  elect  a  con- 
gressional majority  of  two-thirds  for  the  bank  bill.— To  Biddle,  Dec.  29, 1831,  ibid 


STRUGGLE  FOB  THE  CHAETEB       221 

arrived,  and  was  ready  at  any  moment  to  forward  the  bank's 
memorial  to  Congress.  He  waited,  however,  until  Cadwal- 
ader's  return  to  Philadelphia,  that  they  might  talk  the 
matter  over  together.1 

Conversation  with  Cadwalader  only  fixed  him  more  firmly 
in  his  resolution,  but  action  was  still  postponed  until  McLane 
could  send  in  a  communication.2  This  was  delayed,  and  on 
the  6th  of  January,  1832,  Biddle  notified  McDuffie  and  Sena- 
tor Smith  that  the  application  would  be  made,3  and  forwarded 
the  memorial  to  Senator  Dallas.4  He  wrote  Webster  also,5 
but  sent  no  word  to  Clay.  There  was  no  hesitation,  no  sign 
of  being  forced  into  the  step.  "  I  have  scarcely  given  to  any 
question  a  more  deliberate  attention  than  I  have  bestowed  on 
this,  and  after  procuring  all  the  information  within  our 
power,  and  deliberating  upon  it  long  and  anxiously,  I  have 
made  up  my  mind  on  the  clearest  convictions."  His  reasons 
were:  that  the  stockholders  were  unanimously  for  it  now; 
that  delay  would  put  the  question  off  until  1834,  a  date  too 
near  the  expiration  of  the  charter;  that  the  question  was  a 
business,  not  a  political  one;  that  postponing  on  account  of 
the  election  would  in  effect  be  a  discrimination  against  the 
National  Republicans;  that  the  president  had  three  times 
brought  forward  the  question  and  therefore  distinctly  inti- 
mated that  it  ought  to  be  settled.6  He  laid  particular  stress 
upon  the  argument  that  to  postpone  would  be  to  discriminate 
in  favor  of  Jackson  and  so  make  the  bank  a  political  issue7 — 

i"I  am  waiting  anxiously  for  some  signal  to  move  —  and  the  moment  you  hoist 
it,  we  will  send  you  a  memorial.  All  our  information  and  all  my  reflections  go  that 
way.  The  question  was  almost  settled  in  my  mind  when  I  found  that  Mr.  M.  though 
opposed  would  not  be  vexed.  In  truth  I  hope  he  will  be  friendly."  He  added  that 
he  was  convinced  that  the  president  would  not  sign.  Stories  to  that  effect  had 
reached  him  which  rendered  him  sure  of  it. —  To  Cadwalader,  Dec.  30, 1831,  ibid. 

2  To  McDuffie,  Jan.  5, 1832,  P.  L.  B.,  Vol.  IV,  p.  79. 

s Ibid.,  pp.  80,  83.  *Ibid.,  p.  81.  *Ibid.,  p.  89. 

6  To  J.  W.  Webb,  Jan.  5, 1832,  ibid.,  pp.  74,  75. 

1 "  Now  if  we  postpone  it  on  account  of  its  effect  on  one  of  the  candidates  for 
the  Presidency,  we  in  fact  take  the  side  of  that  candidate.  We  make  ourselves  a 
party  to  the  election,  we  violate  our  neutrality." — Ibid. 


222  THE  SECOND  BANK  OP  THE  UNITED  STATES 

an  absurd  argument  which  would  not  have  been  hazarded  six 
months  earlier.  On  the  very  day  that  Biddle  wrote  this 
letter  McLane  sent  his  deferred  protest,  deprecating  imme- 
diate application,  arguing  that  this  Congress  was  not  elected 
to  decide  the  question;  that  it  would  inevitably  get  mixed 
up  with  the  presidential  election;  that  Jackson  would  be 
offended ;  and  that,  since  his  advice  had  not  been  taken,  he 
could  not  interpose  against  a  veto.1 

That  Biddle  in  giving  his  reasons  had  not  exhausted  the 
arguments  for  the  bank's  action  is  self-evident.  The  opinion 
was  firmly  held  by  the  Clay  men  that  application  at  that  time 
would  defeat  Jackson.  If  he  vetoed  the  bill,  he  would  lose 
Pennsylvania ;  if  he  failed  to  veto,  after  his  past  position,  he 
would  lose  many  southern  and  western  votes.  These  were 
the  determining  political  considerations  with  the  National 
Republicans,2  and  it  was  the  belief  in  the  influence  of  the 
former  upon  Jackson  which  gave  the  bank  a  hope,  though 
but  a  slender  one,  that  the  president  would  yield.  Yet  this 
very  motive  for  acting  must  draw  down  upon  the  bank  con- 
demnation, for  the  act  determined  by  it  inevitably  linked 
the  destiny  of  the  corporation  with  that  of  a  political  party, 
making  the  question  of  re-charter  one  to  be  decided  by 
political  rather  than  by  business  considerations.  It  is  infer- 
able, also,  from  Cadwalader's  letters  that  another  motive 
influencing  the  bank  was  the  hope  that  if  Jackson  vetoed 
the  bill  a  two-thirds  majority  of  Congress  favorable  to 
re-charter  could  be  secured  at  the  coming  elections.  This 
was  preposterous. 

1  Jan.  5, 1832,  B.  P. 

2  "  McLane  told  me  that  he  had  most  earnestly  urged  Mr.  Clay  not  to  attempt  to 
pass  a  Bank  bill  at  this  Session,  insisting  that,  if  deferred  to  the  next  Session,  he 
was  satisfied  that  he  could  by  that  time,  and  by  a  Bank  bill  so  framed  as  would  be 
as  useful  as  was  necessary,  induce  Jackson  to  approve  it.    But  that  Clay  persisted 
in  the  hope  that,  if  the  President  approved  the  bill,  he  would  lose  the  support  of 
those  of  his  party  who  had  approved  his  opposition  to  the  Bank,  and  a  vast  many 
others  who  approved  of  the  State  Bank  system.     And,  on  the  other  hand,  if  the 
President  vetoed  the  bill,  he  would  lose  Pennsylvania  and  his  election." — J.  A. 
Hamilton  to  a  friend,  March  14, 1832,  Reminiscences,  pp.  243,  244. 


STRUGGLE  FOB  THE  CHABTEB  223 

Both  Jackson  and  McLane  were  bitterly  offended  by  the 
bank's  action,  and  felt  that  they  had  just  reason  to  complain. 
Jackson  in  particular  must  have  been  deeply  irritated,  since 
he  had  been  persuaded  to  soften  his  message  on  the  under- 
standing that  the  bank  would  not  make  application  until 
after  the  election.1  He  did  not  leave  his  friends  in  doubt  as 
to  his  attitude.  When  informed  that  the  object  was  to  force 
him  to  assent  to  the  bill  or  to  lose  Pennsylvania's  vote,  he 
retorted:  "I  will  prove  to  them  that  I  never  flinch;  that 
they  were  mistaken  when  they  expected  to  act  upon  me  by 
such  considerations."2 

Not  only  did  the  bank  decide  for  itself  the  time  and  mode 
of  applying  for  re-charter,  but  it  selected  its  own  cham- 
pions. General  Samuel  Smith,  who,  as  chairman  of  the 
Senate  Committee  on  Finance,  would  have  been  the  logical 
person  to  present  the  memorial,  was  set  aside,  because  it  was 
feared  that  he  would  not  press  the  bill  with  sufficient  determi- 
nation, and  Senator  Dallas,  a  Pennsylvania  bank  Democrat, 
was  selected  in  his  stead.  Dallas  was  gratified,  having 
desired  the  distinction  as  the  son  of  the  man  generally 
credited  with  being  the  creator  of  the  bank,  and  he  assured 
Cadwalader  that  he  would  not  yield  to  Jackson's  wishes  to 
postpone  the  measure.3  In  the  House,  McDuffie,  chairman 
of  the  Committee  of  Ways  and  Means,  was  the  bank's 
chosen  leader. 

On  the  9th  of  January,  to  the  surprise  of  the  majority  of 
both  its  "friends  and  foes,"  few  of  whom  had  "calculated 

1  Senator  Smith  said  that  McLane  was  hurt,  and  would  not  support  the  bank.— 
C.  J.  Ingersoll  to  Biddle,  Feb.  5, 1832,  B.  P.    "  I  understood  him  to  say  that  the  Presi- 
dent toned  down  the  last  message  on  the  understanding  that  he  should  not  have  the 
question  up  until  after  the  election." — Same  to  same,  Feb.  29, 1832,  ibid.    It  is  evi- 
dent, too,  that  the  movement  compromised  McLane's  position  in  Jackson's  cabinet. 

2  J.  A.  Hamilton  to  a  friend,  Washington,  March  14, 1832,  Reminiscences,  p.  243. 

3  Cadwalader  to  Biddle,  Dec.  29,  1831,  B.  P.     It  was  also  determined  that  no 
National  Republican  should  be  intrusted  with  this  task,  it  being  considered  best  to 
have  a  partisan  of  the  president  present  the  bill. — Ibid.    This  is  in  direct  opposi- 
tion to  what  Sargent  says  Biddle  told  him.—  SAEGENT,  Public  Men  and  Events,  Vol. 
I,  pp.  213,  214.    Sargent  is,  of  course,  mistaken. 


224  THE  SECOND  BANK  OF  THE  UNITED  STATES 

that  a  memorial  would  be  presented  this  Session,"1  the 
bank's  application  was  made  in  both  houses.  Dallas,  to  the 
chagrin  of  the  ardent  bank  men,  played  his  part  but  indif- 
ferently, using  language  which  revealed  the  opposition  of 
the  bank  wing  of  the  Jackson  party  to  the  present  applica- 
tion. He  wished  it  understood  that  he  had  discouraged  the 
presentation,  because  he  considered  it  too  early,  and  because 
this  particular  Congress  had  not  been  elected  for  the  purpose 
of  deciding  the  issue.2 

The  bank  did  not  leave  its  memorial  unsupported.  Biddle 
sent  Horace  Binney,  a  remarkably  able  lawyer,  to  Washing- 
ton to  see  the  bill  through  Congress,  and  at  the  same  time 
busied  himself  in  securing  petitions  for  the  re-charter  from 
state  banks  and  merchants  throughout  the  country.3  He  also 
exerted  all  his  skill  to  procure  a  resolution  from  the  legis- 
lature of  Pennsylvania  instructing  the  senators  and  request- 
ing the  representatives  in  Congress  to  vote  for  the  bilL 
Early  in  February  Biddle  was  informed  that  this  attempt 
had  been  completely  successful,  the  legislature  passing  the 
instructing  resolutions  by  an  almost  unanimous  vote.*  At 
the  same  moment  he  was  told  by  a  friend  who  was  on  an 
intimate  footing  with  Jackson  that  the  president  might  still 
be  induced  to  sign  a  bill.5 

At  once  his  active  mind  reverted  to  his  former  project 
of  securing  a  new  charter  with  the  assistance  of  Jackson. 
How  little  he  felt  bound  to  the  National  Republicans  is 
apparent  from  his  immediate  decision  to  leave  them  com- 
pletely and  throw  himself  upon  the  president,  as  well  as 
by  his  declaration  to  Charles  J.  Ingersoll  that  he  cared 

1  John  Connell  to  Biddle,  Washington,  Jan.  10, 1832,  B.  P. 

2  C.  -D.,  Vol.  VIII,  Part  I,  p.  54.  3  P.  L.  B.,  Vol.  IV,  pp.  96-116. 

*  Unanimously  in  the  senate ;  in  the  house  by  a  vote  of  77  to  7. —  NILES,  Vol. 
XLI,  p.  436. 

5  S.  E.  Burrows  to  Biddle,  Feb.  5, 1832,  B.  P.  Burrows  says  that  he  has  just  spent 
three  days  with  the  president,  and  is  confident  that  the  bank  can  be  re-chartered 
with  Jackson's  consent. 


STRUGGLE  FOR  THE  CHARTER  225 

"nothing  about  the  election." '  The  prospect  of  Clay's 
chagrin  and  Webster's  coldness  did  not  deter  him  for  a 
moment.  On  the  6th  of  February  he  urged  Dallas  to  take 
the  resolutions  of  the  Pennsylvania  legislature  to  Jackson, 
warn  him  not  to  anger  the  state,  and  offer  in  the  name  of 
the  directors  to  accept  a  bill  with  modifications.2  At  the 
same  moment  he  asked  Ingersoll  to  take  similar  action. 
Let  the  Pennsylvania  delegation  press  it  upon  the  president ; 
get  McLane  and  Livingston  started;  "Try  if  you  cannot 
bring  it  about  without  loss  of  time."  The  bank  could  not 
withdraw  the  bill,  but  was  perfectly  willing  to  make  it  an 
administration  measure,  accepting  whatever  modifications 
the  president  might  desire.8  Dallas  disappointed  him.4 
Ingersoll,  on  the  contrary,  was  delighted  with  the  plan,  and 
eagerly  seized  the  opportunity.  He  hastened  to  Livingston 
and  presented  Biddle's  letter  to  him.  Livingston  agreed 
that  the  procedure  was  the  correct  one,  and  said  that  the 
president  would  not  oppose  the  bill  on  constitutional 
grounds,  "but  had  certain  notions  of  his  own  on  the  frame 
of  the  charter  which  ought  to  be  complied  with."  Let  him 
frame  it  to  suit  himself,  replied  Ingersoll.  Livingston  then 
said  that  he  would  attempt  to  secure  the  success  of  the  plan ; 
that  McLane  could  not  remain  neutral ;  and  finally  outlined 
the  modifications  upon  which  he  thought  Jackson  would 
insist.5 

Livingston  approached  the  president  at  once,  and  McLane 
joined  him  in  the  attempt  to  secure  Jackson's  assent.  Jack- 

iFeb.  13, 1832,  P.  L.  B.,  Vol.  IV,  p.  167. 

2  In  doing  this  he  would  make  his  own  fortune.    Please  tell  him  so.    The  presi- 
dent, too,  would  be  elected.— Biddle  to  Binney,  Feb.  6, 1832,  ibid.,  pp.  150, 151. 

3  Feb.  6, 1832,  ibid.,  p.  152 ;  also  Feb.  9, 1832,  ibid.,  p.  162. 
*  Biddle  to  Ingersoll,  Feb.  13, 1832,  ibid.,  p.  168. 

5  Ingersoll  to  Biddle,  Feb.  9,  1832,  B.  P.  See  Ingersoll's  account,  War  of  1812, 
Vol.  II,  p  268,  where,  however,  he  does  not  mention  his  own  agency. 

The  modifications  mentioned  by  Livingston  were  as  follows :  The  bank  to  possess 
only  real  estate  enough"  to  carry  on  its  business ;  states  to  be  permitted  to  tax  the 
branches ;  some  additions  to  be  made  to  the  capital,  so  that  new  subscribers  to  the 
stock  might  be  accommodated. 


226  THE  SECOND  BANK  OF  THE  UNITED  STATES 

son,  said  Livingston,  was  particularly  anxious  that  the 
government  should  cease  to  be  a  stockholder,  and  also 
desired  the  modifications  already  mentioned.1  Biddle  was 
pleased  to  hear  this,  and  declared  that  the  bank  would  go 
nine-tenths  of  the  way  to  meet  the  president.  "Let  him 
take  the  charter  and  make  any  changes  he  likes,  let  him 
write  the  whole  charter  with  his  own  hands.  I  am  sure 
that  we  would  agree  to  his  modifications;  and  then  let  him 
and  his  friends  pass  it.  It  will  then  be  his  work.  He  will 
then  disarm  his  adversaries."1  On  the  21st  of  February 
Ingersoll  wrote  that  Livingston  had  "  got  most  if  not  all 
the  President's  advisers  to  second  our  movement  and  that 
he  thinks  it  will  succeed."  3  In  another  letter  of  the  same 
date  he  transmitted  the  intelligence  that  the  entire  cabinet, 
with  the  exception  of  Taney,  was  favorable.  On  the  22d  he 
had  a  decisive  interview  with  Livingston,  who  outlined  the 
modifications  which  the  president  had  finally  determined 
upon.  The  government  was  not  to  hold  any  stock,  but  was 
to  continue  appointing  directors  on  the  parent  board,  and 
in  addition  to  appoint  at  least  one  director  at  each  of  the 
offices;  the  states  were  to  be  permitted  to  tax  the  bank's 
property  at  the  same  rate  used  in  taxing  the  property  of 
state  banks ;  no  real  estate  was  to  be  held  excepting  such  as 
was  absolutely  needed.  These  were  the  president's  terms. 
His  friends  added  several  others:  a  certain  proportion  of 
the  capital  stock  was  to  be  open  to  new  subscriptions,  the 
directors  were  to  nominate  two  or  three  of  their  number,  and 
the  president  of  the  United  States  would  appoint  one  of  these 
president  of  the  bank.*  Biddle  agreed  to  all  of  these  terms 

1  Ingersoll  to  Biddle,  Feb.  12, 1832,  B.  P. 

2  To  C.  J.  Ingersoll,  Feb.  13, 1832,  P.  L.  B.,  Vol.  IV,  p.  167. 

3  Ingersoll  to  Biddle,  Feb.  21,  1832,  B.  P. 

*  Livingston  said :  "  I  wish  you  would  ascertain  from  him  whether  the  Bank  will 
agree  to  the  President's  views  of  the  terms  for  a  new  charter,  and  he  proceeded  to 
recapitulate  them  — As  my  memory  might  fail  me  in  some  particulars,  said  I, 
suppose  I  make  a  written  note  of  them.  Very  well  he  rejoined,  and  accordingly 


STRUGGLE  FOB  THE  CHARTER       227 

excepting  the  last,  which  he  passed  without  mention.1  All 
was  now  considered  settled,  and  Biddle  was  pleased  that 
finally,  after  three  attempts,  the  goal  would  be  reached,  with 
the  consent  of  the  president.  What  the  dismayed  Clay 
men  would  say  to  this  he  neither  asked  nor,  apparently, 
cared.  The  welfare  of  the  bank,  and  not  the  election  of 
Henry  Clay,  was  the  consideration  which  swayed  him.  His 
one  fear  now  was  that  the  friends  of  the  institution,  in  con- 
junction with  some  of  its  enemies,  might  postpone  the  bill,2 
in  which  case  the  plan  of  securing  a  charter  in  agreement 
with  the  administration  would  fall  to  the  ground,  since 

I  sat  down  at  his  desk,  made  the  enclosed  minute  with  his  assistance,  read  it  to  him 
when  done  —  and  we  parted  on  the  footing  of  his  unreserved  declaration  of  his  desire 
that  I  would  submit  them  for  your  approbation  or  otherwise,  as  may  be." 

THE  INCLOSUBE 

"  1.  No  government  interest  in  the  bank. 

"  2.  Appointment  of  one  and  more  directors  at  the  branches. 

"  3.  Government  represented  there. 

"  4.  Taxation  by  states  of  property  of  bank  —  i.  e. — property  in  bank  whether 
real  or  personal  to  be  liable  to  same  rule  of  taxation  of  State  as  their  own  property. 

"  5.  No  real  estate  except  such  as  b'ot  in  to  secure  debts  and  to  be  sold  in 
reasonable  time. 

"  6.  Government  to  have  no  interest  in  Bank. 

"7.  Certain  proportion  of  capital  thrown  open  for  new  subscription,  which 
may  be  done  by  pro  rata  deduction  from  present  capital. 

"  8.  Directors  to  nominate  two  or  three  friends  of  them  President  of  the  United 
States  to  choose  one  a  President. 

"  written  22d  February  in  Mr.  Livingston's  house  and  presence,  read  to  and 
sanctioned  by  him.  C.  J.  INGERSOLL." 

In  the  body  of  the  letter  Ingersoll  again  wrote  out  the  conditions  revised  as 
follows : 

"  1.  Government  no  interest  in  the  Bank. 

"  2.  President  to  appoint  a  director  at  each  branch. 

"  3.  The  States  to  tax  its  property  as  they  tax  own. 

"  4.  Bank  to  hold  no  real  estate  except  such  as  was  taken  in  payment  or  secur- 
ity of  debt,  and  to  part  with  in  set  time. 

"  These  the  Pres's  terms. 

"  5.  Certain  proportion  of  capital  stock  to  be  thrown  open  to  new  subscriptions. 

"This  not  President's,  but  Mr.  L.  seems  to  be  very  tenacious  of  it. 

"  6.  Directors  to  nominate  annually  2  or  3  persons  of  whom  President  to  appoint 
any  one  President  of  the  Bank. 

"  This  neither  Pres's  nor  L's,  but  others."— Ingersoll  to  Biddle,  Feb.  23, 1832,  B.  P. 

1  Biddle  wrote  out  at  length  the  other  five  points,  and  assented  to  them  without 
reservation.— Biddle  to  Ingersoll,  Feb.  25, 1832,  P.  L.  B.,  Vol.  IV,  pp.  247-50. 

2  This  is  "  the  greatest  danger  now." — Biddle  to  Herman  Allen,  of  Burlington, 
Vt.,  Feb.  27, 1832,  ibid.,  p.  189 ;  also  to  J.  W.  Webb,  Feb.  20,  ibid.,  p.  176. 


228  THE  SECOND  BANK  OP  THE  UNITED  STATES 

the  president  would  prefer  postponement  to  any  action 
whatever. 

All  these  fair  prospects  were  unexpectedly  blighted  by 
what  appears  on  the  surface  to  be  a  remarkable  fatality,  but 
which  fuller  knowledge  may  show  to  have  been  no  chance 
medley.  It  must  be  recollected  that  Congress  thus  far  had 
taken  no  decisive  step  on  the  subject,  so  that  the  president 
considered  himself  as  yet  unfettered  in  his  action.  Just  at 
the  moment  when  agreement  had  apparently  been  reached, 
Senator  Benton,  the  inveterate  enemy  of  the  bank,  resolved 
that  Congress  should  act,  and  in  such  a  way  as  would  pre- 
clude for  the  time  being  any  further  consideration  of  the 
plan  now  before  Jackson.  Was  he  acting  in  conjunction 
with  those  of  Jackson's  advisers  who  opposed  the  bank, 
knew  what  was  being  done,  and  had  determined  to  check- 
mate the  skilful  moves  of  Biddle  and  Ingersoll  ?  Or  was 
Jackson  himself  playing  fast  and  loose  with  McLane  and 
Livingston  ?  The  latter  conjecture  is  rendered  probable  by 
a  letter  of  February  16  from  C.  C.  Cambreleng  to  Jesse 
Hoyt,  wherein  he  says  : 

Judge  Clayton  of  Georgia  has  a  resolution  prepared  and  will 
offer  it  as  soon  as  he  can — -it  will  cover  the  objects  in  view — I 
shall  see  the  President  to-night  —  who  has  a  confidential  director 
on  the  spot.  You  need  not  fear  but  what  we  shall  take  care  of  the 
Mammoth  in  some  way  or  other.1 

Certain  it  is  that  the  opponents  of  the  bank  had  resolved  that 
the  institution  should  be  investigated.  The  result  would  be 
fatal  to  the  bank's  hopes.  The  president  would  do  nothing 
until  after  investigation,  and  nothing  then  if  the  investiga- 
tion did  not  show  the  bank  spotless,2  which  it  certainly 
would  not  do  to  Jackson's  satisfaction.  Benton' s  account  of 

1  MACKENZIE,  Lives  of  Butler  and  Hoyt,  p.  101. 

2  "  On  the  other  hand,  should  that  enquiry  not  be  made  successfully  and  a  Bank 
bill  be  passed,  the  President  will  most  certainly  veto  it.    He  is  open  and  determined 
on  this  point.    I  conferred  with  him  yesterday  on  the  subject." — J.  A.  Hamilton  to  a 
friend,  Washington,  March  14, 1832,  Reminiscences,  p.  243. 


STRUGGLE  FOB  THE  CHARTER       229 

his  maneuver  is  that  he  wished  to  employ  this  means  in 
order  to  furnish  campaign  material  against  the  bank.1  He 
and  his  friends  therefore  determined  that  an  investigation  of 
its  affairs  should  be  demanded  in  the  House.  This  would 
place  the  bank  party  in  a  dilemma.  "  If  the  investigation 
was  denied,  it  would  be  guilt  shrinking  from  detection  ;  if 
admitted,  it  was  well  known  that  misconduct  would  be  found."2 
Benton  provided  A.  S.  Clayton,  of  the  House,  with  a  number 
of  charges  of  misconduct  and  violation  of  the  charter,  and 
on  the  23d  of  February  Clayton  demanded  an  investigation.8 

The  act  was  immediately  fatal  to  Biddle's  well-laid  plans. 
The  president  "  must  needs  await  the  issue  "  of  the  inquiry, 
said  Livingston;4  and  an  investigation  must  take  place; 
there  must  be  no  shirking  examination,  if  the  president  was 
to  do  anything  for  the  bank.5  On  the  6th  of  March  Living- 
ston asserted  that  the  president  would  assuredly  have  signed 
the  bill  agreed  upon  were  it  not  for  the  action  of  Congress ; 6 
and  on  the  14th  he  repeated  that  there  was  "nothing  in 
the  way  but  the  Inquiry."  7  The  president's  position,  how- 
ever, was  now  completely  changed.  Neither  he  nor  any 
other  man  knew  what  he  would  do.8 

Clayton's  demand  for  an  investigation  was  acceded  to 
by  the  bank's  supporters  after  a  heated  debate,  McDuffie 
for  some  unknown  reason  allowing  it  to  take  place  under 
conditions  unfavorable  to  the  bank.9  Speaker  Stevenson, 

1 "  Our  course  of  action  became  obvious,  which  was  —  to  attack  incessantly, 
assail  at  all  points,  display  the  evil  of  the  institution,  rouse  the  people  —  and  prepare 
them  to  sustain  the  veto." — Thirty  Years,  Vol.  I,  p.  235. 

2  Ibid.,  p.  236.        3  ibid.,  pp.  237,  238.        *  Ingersoll  to  Biddle,  March  1, 1832,  B.  P. 

5  Same  to  same,  March  3,  quoting  Livingston,  ibid. 

6  Same  to  same,  March  6, 1832,  ibid.         7  Same  to  same,  March  14, 1832,  ibid. 

8  Same  to  same,  March  11, 1832,  ibid.    Had  talked  with  Lewis,  "  who  does  not 
know  what  the  President  will  do."    Same  to  same,  March  14,  has  had  "the  most 
satisfactory  interview"  with  Livingston,  but  nothing  to  be  done  yet. 

9  See  ADAMS,  Memoirs,  Vol.  VIII,  p.  483.     His  action,  said  Ingersoll,  was  a 
il  capitulation."    Adams  said  to  Ingersoll,  "  he  is  politically  either  a  coward  or  a 
traitor."    Ingersoll  thought  it  was  want  of  nerve  and  coolness. — To  Biddle,  March  2, 
1832,  B.  P.    On  March  6  Ingersoll  concluded,  however,  that  MeDuffie's  object  was  to 


230  THE  SECOND  BANK  OP  THE  UNITED  STATES 

who  was  an  uncompromising  enemy,  appointed  a  select  com- 
mittee with  an  anti-bank  majority.  The  committee  failed, 
however,  to  substantiate  a  single  one  of  the  multifarious 
charges.  Indeed,  the  report  showed  total  ignorance  of  bank- 
ing operations  and  an  astounding  incompetence  on  the 
part  of  the  majority.  They  were  bewildered  by  the  heaps 
of  abstruse  documents  placed  before  them,  they  had  no 
training  in  monetary  affairs,  and,  worst  of  all,  no  kind- 
hearted  bank  president  volunteered  to  lead  them  through 
the  doleful  labyrinth.  The  result  was  an  absurdly  incon- 
sistent and  blundering  report,  which  was  completely  refuted 
by  the  minority,  and  torn  to  tatters  by  a  minority  of  the 
minority,  John  Quincy  Adams,  whose  talents  for  invec- 
tive and  scathing  denunciation  never  appeared  to  better 
advantage.  Clayton's  report  was  not  only  admittedly  a  fail- 
ure, but  it  was  greeted  with  shouts  of  Homeric  laughter  by 
every  man  of  understanding.  "  I  almost  pity  Clayton.  He 
is  quite  prostrated,"  wrote  Watmough  to  Biddle,1  and  Niles 
declared  that  the  report  made  converts  to  the  cause  of  the 
bank.2 

Nevertheless,  the  understanding  ones  were  mistaken, 
for  "  the  people,"  who  do  not  need  to  understand,  were  con- 
vinced that  something  was  wrong  with  the  bank,  and  they 
were  to  determine  its  fate.3  More  important  still  for  the 
moment  was  the  effect  upon  Jackson,  who  was  convinced 

press  the  tariff  question  before  the  bank. — To  Biddle,  ibid.  Biddle  was  disgusted. — 
To  C.  J.  Ingersoll,  March  4, 1832,  P.  L.  B.,  Vol.  IV,  p.  202.  He  considered  "  McDuffie's 
acquiescence  unfortunate." — To  Edward  Everett,  March  10, 1832,  ibid. 

1  May  2, 1832,  B.  P. 

2 "Some  who  had  doubts  as  to  the  correctness  of  its  [the  bank's]  proceedings, 
were  satisfied  by  the  showings  of  its  enemies,  ....  that  all  was  right  1  —  and  others, 
who  were  opponents  of  the  institution,  have  laughed  so  much  at  the  solemn  arraign- 
ment of  the  charges  and  statements  against  it,  as  to  become  quite  good-humored, 
and  now  feel  entirely  willing  to  renew  its  charter,  with  a  few  modifications  of  the 
present  powers  of  the  institution." — NILES,  Vol.  XLII,  p.  209. 

3  The  fate  of  the  bank  and  the  condemnation  of  its  opponents  are  unconsciously 
pronounced  by  Benton  in  these  words :  "  Certainly  the  great  business  community, 
with  few  exceptions,  comprising  wealth,  ability  and  education,  went  for  the  bank, 
and  the  masses  for  General  Jackson." — Thirty  Years,  Vol.  I,  p.  228. 


STRUGGLE  FOB  THE  CHARTER  231 

that  the  charges  had  been  fairly  established.1  So  much  may 
be  gathered  from  his  veto  message,  wherein  he  declares  that 
the  examination  was  "  unwillingly  conceded  and  so  restricted 
in  time  as  necessarily  to  make  it  incomplete  and  unsatisfac- 
tory," but  yet  it  disclosed  "enough  to  excite  suspicion  and 
alarm,  ....  enough  to  induce  a  majority  of  the  committee 
....  to  recommend  a  suspension  of  further  action  upon 
the  bill  and  a  prosecution  of  the  inquiry,"  and  that  "it  was 
to  have  been  expected  that  the  bank  itself,  ....  would 
have  withdrawn  its  application  for  the  present,  and  demanded 
the  severest  scrutiny  into  all  its  transactions."  2  Jackson, 
then,  was  confirmed  in  his  suspicions  of  the  bank's  integrity, 
and  believed  that  the  investigation  imposed  upon  the  direc- 
tors the  duty  of  withdrawing  their  application.  The  plan 
of  re-chartering  the  bank  at  this  time  with  his  consent  was 
no  longer  tenable. 

It  remained  to  do  one  of  two  things:  either  to  withdraw 
the  bill,  or  to  press  forward  in  the  hope  that  the  president 
could  be  persuaded  to  assent  or  that  the  necessary  two-thirds 
majority  for  the  bill  could  be  secured.  Rumors  that  the 
measure  would  be  deferred  had  existed,  and  they  revived 
now.3  But  on  this  point  Biddle  was  inexorable.  The 
measure  could  not  be  withdrawn  without  a  tacit  confession 
of  error  in  having  presented  it.  The  leaders  of  the  National 
Republicans  were  also  resolved  that  there  should  be  no 
postponement.4  It  was  this  dogged  resolution  to  press  for- 

l "  The  affairs  of  the  Bank  I  anticipated  to  be  precisely  such  as  you  have  inti- 
mated. When  fully  disclosed,  and  the  branches  looked  into,  it  will  be  seen  that  its 
corrupting  influence  has  been  extended  everywhere  that  could  add  to  its  strength 
and  secure  its  recharter." — Jackson  to  James  A.  Hamilton,  March  28, 1832,  Remi- 
niscences, p.  244. 

2  Messages  and  Papers,  Vol.  II,  p.  589.  3  McLane  to  Biddle,  April  8, 1832,  B.  P. 

*  "  Messrs.  Clay  and  Webster  replied  ....  that  they  were  confident  of  their  ability 
to  carry  a  bill  through  Congress  re-chartering  the  bank,  even  though  the  bill  should 
encounter  a  presidential  veto ;  but  that  they  could  not  be  responsible  for  the  result 
if,  in  the  heat  of  the  contest,  the  bank,  abandoning  its  reliable  friends,  should  strike 
hands  with  its  foe."— WEED,  Autobiography,  Vol.  I,  p.  374.  See  corroborative  state- 
ments in  INGEBSOJLL,  Vol.  II,  p.  269. 


232  THE  SECOND  BANK  OP  THE  UNITED  STATES 

ward,  despite  Jackson's  opposition,  which  ruined  the  insti- 
tution, becoming  "  the  great  cause  of  the  conflict  which  arose 
between  the  Bank  and  the  President," l  and  it  explaina 
Livingston's  assertion  that  the  veto  "could  not  have  been 
avoided;  the  managers  of  the  bank  drew  it  on  themselves."* 
Nevertheless,  though  determined  to  prosecute  the  attempt 
notwithstanding  the  opposition  of  Jackson,  Biddle  resolved 
to  approach  him  once  more.  On  the  20th  of  May  he  took 
up  quarters  in  Washington  to  manage  the  campaign  in 
person,  and  immediately  attempted  to  return  to  the  plan 
so  near  success  before  the  fatal  investigation.  He  sought 
out  McLane  and  had  a  "full  and  frank  conversation'* 
with  him  on  the  subject.  He  then  saw  Livingston.  He 
argued  that  the  investigation  had  resulted  so  favorably 
for  the  bank  that  it  disarmed,  "or  ought  to  disarm  some  of 
the  hostility  hitherto  entertained."  Consequently  Jackson 
could  revert  to  the  project  agreed  upon  before  the  investi- 
gation, the  bank  being  willing  to  accept  "such  modifi- 
cations as  would  be  agreeable  to  the  administration."  It 
was  awkward,  he  said,  to  have  "the  measure  before  Congress, 
while  the  Department  to  which  it  belonged  had  no  cogni- 
zance of  it."  McLane  and  Livingston  conferred  together, 
probably  consulted  the  president,  and  took  once  more  the 
sense  of  the  cabinet.  But  the  situation  was  unchanged. 
Livingston  assured  Biddle  that  "the  awkwardness  was 
irretrievable." :  Jackson  would  be  satisfied  only  by  the 
withdrawal  of  the  measure. 

1  Ingersoll  to  Biddle,  Washington,  Jan.  18, 1833,  B.  P. 

2  Livingston  to  Dallas,  Ang.  28, 1832,  HUNT,  Life  of  Livingston,  p.  370. 

3 "On  my  arrival  I  began  with  a  full  and  frank  conversation  with  Mr.  McLane 
on  the  subject  of  the  Bank  and  at  his  suggestion  saw  Mr.  Livingston  —  after  which 
they  conferred  —  and  I  saw  Mr.  Livingston. 

"  The  general  purport  of  my  communication  was  this.  The  investigation  has 
given  a  new  aspect  to  our  affairs  —  it  disarms,  or  ought  to  disarm  some  of  the  hos- 
tility hitherto  entertained  towards  it,  and  furnishes  a  new  motive  for  pressing  a 
decision.  Under  these  circumstances  it  would  be  very  agreeable  if  the  Executive 
would  concur  in  promoting  the  object  — which  we  would  gladly  attain  by  accept- 


STRUGGLE  FOB  THE  CHABTEB       233 

Having  failed  in  this  last  attempt,  nothing  remained  but 
to  press  the  bill,1  making  it  as  unobjectionable  to  the  presi- 
dent as  possible,  in  the  hope  that  his  assent  might  thus  be 
secured.  As  Biddle  knew  precisely  the  kind  of  a  charter 
which  the  president  could  be  brought  to  compromise  upon, 
the  task  was  not  difficult;  and  a  reading  of  the  bill  to  con- 
tinue the  bank  will  show  that  some  attempt  was  made  to 
meet  the  president's  wishes.2 

After  the  interview  with  McLane  and  Livingston,  Biddle 
had  a  conference  with  McDuffie  and  Webster,  and  it  was 
determined  to  take  up  the  bill  in  the  Senate  first.3  Accord- 
ingly on  the  23d  of  May  Dallas,  reporting  from  the  Select 
Committee  to  which  the  petition  for  re-charter  had  been  com- 
mitted,* outlined  the  amendments  to  the  original  charter 
which  the  bank  party  was  willing  to  grant.  A  number  of 
other  amendments  was  suggested,  both  by  the  friends  and 
by  the  enemies  of  the  bank.  The  southerners  wanted  the 
rate  of  interest  lowered,6  and  it  was  proposed  that,  instead  of 
demanding  a  bonus,  the  rate  should  be  5  per  cent.6  Mangum 
thought  that  this  concession  would  tend  most  materially  to 
"  allay  public  excitement  in  the  South." T  Other  amend- 
ments offered  demanded  that  no  branch  should  be  established 

ing  such  modifications  as  would  be  agreeable  to  the  administration.  I  stated  more- 
over the  extreme  awkwardness  of  having  such  a  measure  before  Congress  while 
the  Department  to  which  it  belonged  had  no  cognizance  of  it  —  and  my  anxiety  to 
cooperate  with  the  Executive  in  modifying  and  perfecting  the  measure.  I  need  not 
detail  peculiarity  of  their  situation  which  makes  them  passive  and  all  that  I  could 
learn  from  Mr.  Livingston  was  that  the  awkwardness  was  irretrievable  —  and  that  it 
only  remained  to  make  the  bill  as  unexceptionable  as  possible. 

"  We  have  then  parted  good  friends."— Biddle  to  Cadwalader,  May  30, 1832,  B.  P. 

1 "  I  then  betook  myself  seriously  to  the  passage  of  the  bill." — Same  to  same, 
ibid.,  loc.  cit. 

2  In  these  points :  Not  more  than  two  offices  in  each  state ;  real  estate  not  neces- 
sary to  the  bank's  business  not  to  be  held  more  than  five  years ;  the  bank  might 
appoint  two  officers  to  sign  its  notes." —  See  Ingersoll's  remarks,  Vol.  II,  pp.  268,  269. 

3  Biddle  to  Cadwalader,  May  30, 1832,  B.  P.    Note  the  absence  of  Clay. 

*  Dallas,  Webster,  Hayne,  Johnston,  and  Ewing.    All  friends  of  the  bank  except- 
ing Hayne.—  C.  D.,  Vol.  VIII,  Part  I,  p.  55. 
5FOBSYTH,  June  6, 1832,  ibid.,  p.  1045. 
6 BIBB,  June  4, 1832,  ibid.,  p.  1022.  TMANQUM,  June  5,  ibid.,  p.  1030. 


234  THE  SECOND  BANK  OF  THE  UNITED  STATES 

in  a  state  without  the  state's  consent ;  that  branches  should 
be  subject  to  taxation  by  the  states;1  that  the  president  of 
the  United  States  should  appoint  all  the  presidents  and  one- 
half  of  the  directors  of  the  bank  and  its  branches,  who  need 
not  be  stockholders;2  that  the  bank  should  be  required  to 
take  any  of  its  notes  at  any  of  its  branches  in  payment  of 
debts  from  individuals;8  that  its  monopoly  should  be  de- 
stroyed ;  *  that  members  of  Congress  and  officers  of  the  gov- 
ernment should  be  prohibited  from  holding  stock ; 5  that  in 
case  the  public  deposits  exceeded  $1,000,000,  interest  should 
be  charged  at  3  per  cent. ; 6  and  that  foreigners  should  not  be 
permitted  to  own  stock.7  It  is  apparent  that  all  these  amend- 
ments contemplated  no  fixed  plan  of  improving  the  bank  as 
a  financial  concern.  The  only  one  which  could  be  so  con- 
sidered was  that  compelling  it  to  receive  all  its  notes  from 
individuals  in  the  payment  of  debts.  The  remaining  amend- 
ments looked  to  depriving  the  bank  of  power  and  efficiency 
for  the  benefit  of  state  rights  or  of  state  banks,  or  else  were 
intended  to  diminish  its  profits.  They  were  offered  mainly 
with  the  purpose  of  embarrassing  the  bank  and  assisting 
Jackson  in  the  coming  campaign.8  All  new  amendments 
were  rejected  with  the  exception  of  one  compelling  the  bank 
to  furnish  annually  to  the  secretary  of  the  treasury  a  list  of 
foreign  stockholders,  and  to  any  state  treasurer,  on  demand, 
a  list  of  stockholders  resident  in  his  state;  and  another 
allowing  Congress  at  any  time  to  prohibit  the  issue  of  all 
notes  of  a  smaller  denomination  than  twenty  dollara 

Even  at  this  juncture  Biddle  was  warned  to  pause,  and 
the  bank  Democrats  appealed  to  him  to  defer  the  bill.9     He 

i  MAECT,  June  6,  C.  D.,  VIII,  Part  I,  p  1043.  2  BIBB,  June  1,  ibid.,  p.  1005. 

3  IDEM,  ibid.,  p.  1007.  *BENTON,  June  2,  ibid.,  p.  1007. 

B  IDEM,  ibid.,  p.  1010.  6  WHITE,  June  6,  ibid.,  p.  1045. 

1  BENTON,  June  2,  ibid.,  p.  1010.  8  Thirty  Years,  Vol.  I,  p.  236. 

SBenton  said  as  late  as  June  2  that  Jackson  would  veto  the  bill  if  "pressed 
now."— INGEESOLL,  Vol.  II,  p.  269. 


STRUGGLE  FOB  THE  CHARTER  235 

refused.  On  the  9th  of  June  the  resolutions  of  the  Penn- 
sylvania legislature  instructing  their  senators  and  asking  their 
representatives  to  vote  for  the  bill  were  presented  in  the 
Senate.  Two  days  later  the  bill  passed  that  body  by  a  vote 
of  28  to  20, '  and  on  the  3d  of  July  the  House  of  Repre- 
sentatives by  a  vote  of  107  to  85.2  The  vote  in  the  Senate 
is  significant  of  the  position  of  various  parts  of  the  Union 
on  the  question.  All  the  New  England  senators  voted  aye 
excepting  Hill  of  New  Hampshire ;  of  the  senators  from  the 
middle  states  only  three  were  opposed,  those  from  New  York 
and  one  from  New  Jersey.  In  the  South  and  Southwest 
only  three  were  favorable,  those  from  Louisiana  and  one 
from  Mississippi.  All  the  western  states  were  favorable 
excepting  Kentucky,  Illinois,  and  Missouri,  which  divided 
their  votes.  The  determined  opposition  was  from  the  South 
and  Southwest.3 

The  new  provisions  modified  and  improved  the  original 
act.  The  bank  was  given  a  renewed  lease  for  fifteen  years ; 
it  might  have  two  or  more  officers  whose  sole  duty  should 
consist  in  signing  its  notes  of  a  less  denomination  than 
$100;  it  was  to  issue  "no  branch  bank  drafts,  or  other  bank 
paper  not  payable  at  the  place  where  issued"  under  the 
denomination  of  $50;  it  was  to  pay  all  notes  of  a  less  denomi- 
nation at  the  bank  and  at  the  office  whence  issued;  it  must 
receive  all  its  notes  at  whatever  offices  tendered  in  payment 
of  debts  due  from  state  banks ;  it  must  not  hold  for  a  longer 
period  than  five  years  real  estate  in  excess  of  what  was  neces- 

1  Senate  Journal,  22d  Cong.,  1st  Sess.,  p.  345.  Biddle  then  returned  to  Philadel- 
phia. 

2 House  Journal,  22d  Cong.,  1st  Sess.,  p.  1074. 

3 Senate  Journal,  22d  Cong.,  1st  Sess.,  pp.  345, 346,  June  11, 1832.  For :  Maine,  Ver- 
mont, Rhode  Island,  Connecticut,  Massachusetts,  Pennsylvania,  Maryland,  Dela- 
ware, Ohio,  Indiana,  Louisiana.  Against:  New  York,  Virginia,  South  Carolina, 
North  Carolina,  Tennessee,  Alabama,  Georgia.  Divided :  New  Hampshire,  Kentucky, 
Illinois,  New  Jersey,  Missouri,  Mississippi.  Senators  instructed  for :  Pennsylvania, 
Maryland,  Delaware,  Louisiana;  against:  New  York.— House  Journal,  22d  Cong., 
1st  Sess.,  p.  500. 


236  THE  SECOND  BANK  OP  THE  UNITED  STATES 

sary  for  carrying  on  its  operations;  it  must  not  have  more 
than  two  offices  in  any  state  where  more  than  that  number 
were  not  already  established;  it  was  to  pay  an  annuity  of 
$200,000  to  the  United  States ;  Congress  might  prohibit  the 
issue  of  any  notes  of  less  than  $20;  the  cashier  was  to 
furnish  annually  to  the  secretary  of  the  treasury  a  list  of 
foreign  stockholders,  and,  on  demand,  to  the  treasurer  of  any 
state  a  list  of  stockholders  resident  in  his  state.1 

These  amendments  were  skilfully  designed  to  satisfy  the 
powerful  opposition  of  states  and  state  banks  and  that 
aroused  by  the  issue  of  branch  drafts,  but  they  also  achieved 
a  much  more  commendable  purpose — that  of  amending  the 
currency  by  modifying  the  bank's  privileges  of  issue.  The 
attention  of  Congress  was  evidently  fixed  on  this  question 
almost  to  the  exclusion  of  any  other.  This  was  natural, 
because  the  issues  were  the  absorbing  subject  of  discussion 
at  that  day,  and  were  much  more  important  than  later, 
because  deposits  constituted  a  relatively  small  part  of  the 
bank's  currency.  The  amendments  were  consequently  of 
much  importance.  Thus  the  permission  to  have  officers 
whose  sole  duty  should  be  the  signing  of  the  bank's  bills 
would  permit  the  issue  of  sufficient  paper  to  supply  the  South 
and  West.  It  would  also  render  counterfeiting  more  difficult. 
The  prohibition  of  the  issue  of  branch  drafts  would  terminate 
the  use  of  an  irregular  currency,  which  might  be  dangerous, 
and  which  was  certainly  not  amenable  to  the  laws  that 
applied  to  the  rest  of  the  bank's  issues ;  the  clause  compel- 
ling the  bank  to  pay  all  its  notes  of  a  less  denomination  than 
$50  at  the  place  of  issue  would  make  almost  all  the  bank's 
notes  payable  at  these  places,  as  well  as  at  the  parent  bank; 
it  would  tend  to  destroy  the  slight  depreciation  which  existed, 
and  to  place  a  check  upon  over-issues,  since  the  notes  would 
be  more  easily  redeemable  than  in  the  past ;  the  necessity  of 

1  Senate  Journal,  22d  Cong.,  1st  Sess.,  pp.  451-3.    See  Appendix  IV  for  the  bill. 


STRUGGLE  FOB  THE  CHAKTEB       237 

accepting  all  notes  from  state  banks  would  operate  in  the 
same  way,  but  to  a  much  greater  extent,  since  it  would  have 
meant  virtually  the  receipt  of  all  notes  at  all  the  offices  from 
both  the  state  banks  and  individuals.  Individuals  with  dis- 
tant branch  notes  would  have  deposited  them  in  state  banks 
if  the  branch  refused  to  accept  them,  and  the  state  bank 
would  then  offer  them  in  payment  of  balances  when  they 
would  of  necessity  be  received.  The  arrangement  would 
therefore  terminate  all  depreciation ;  it  would  do  much  more 
than  this,  for  it  would  materially  reduce  the  bank's  ability 
to  control  the  issues  of  the  state  banks,  giving  the  latter  a 
power  to  draw  specie  for  notes  not  issued  by  the  particular 
branches  at  which  the  notes  were  offered.  The  inevitable 
result  would  be  that  the  bank  must  diminish  its  business  in 
order  not  only  to  retain  control  of  the  state  banks,  but  also 
to  prevent  them  from  securing  ruinous  control  over  it.  The 
state  banks  would  in  turn  be  compelled  to  diminish  their 
accommodations.  The  effect  would  certainly  not  have  been 
injurious  from  a  business  point  of  view,  since  it  would  place 
new  restrictions  on  the  tendency  to  over-banking;  but  it 
would  be  so  annoying  to  the  bank  that  Biddle  protested 
vigorously  against  the  provision.1  Remonstrance  was  use- 
less, for  Senator  Ewing,  who  championed  the  amendment, 
declared  flatly  that  unless  it  were  incorporated  in  the  bill 
many  of  the  western  members  would  not  vote  for  the  bank.2 
Under  its  operation  the  bank's  notes  would  have  been  as 
convertible  as  the  notes  of  the  present  national  banks. 
Similarly,  the  clause  permitting  Congress  to  prohibit  the 
issue  of  all  notes  less  than  $20  would,  if  Congress  used  the 
power  granted,  materially  reduce  the  bank's  circulation  in 
the  interest  of  the  state  banks.  All  the  defects  of  the  bank's 
note  issues  would  have  been  supplied  if  the  bill  for  the  new 
charter  had  succeeded. 

i  To  H.  Binney,  Feb.  18, 1832,  P.  L.  B.,  Vol.  IV,  p.  181. 
2H.  Binney  to  Biddle,  Feb.  14, 1832,  B.  P. 


238  THE  SECOND  BANK  OP  THE  UNITED  STATES 

Still  another  clause  which  would  have  had  a  far-reaching 
effect  in  improving  the  character  of  the  bank's  business  was 
that  providing  that  the  corporation  should  not  hold  longer 
than  five  years  real  estate  acquired  for  other  than  its  neces- 
sary business  operations.  The  result  of  this  clause  would 
have  been  to  diminish  the  temptation  to  loan  on  mortgages 
and  other  real-estate  security —  a  practice  which  was  largely 
responsible  for  the  bank's  difficulties  in  1819.  In  so  far  as 
the  clause  thus  operated,  it  would  have  been  of  vast  conse- 
quence in  the  improvement  of  banking  everywhere  in  the 
United  States.  No  doubt  it  would  have  diminished  the  capi- 
tal loaned  in  the  West  and  South,  thus  decreasing  the  bank's 
profits  while  increasing  its  security.1 

The  remaining  amendments  were  important,  but  by  no 
means  so  essential  as  those  already  mentioned.  The  restric- 
tion of  its  offices  to  two  in  any  one  state  was  a  concession  to 
state  rights  and  to  state  banks;  the  necessity  of  supplying 
the  secretary  of  the  treasury  with  the  names  of  foreign  stock- 
holders could  serve  no  particular  purpose,  except  that  it  met 
a  popular  demand ;  but  that  of  giving  to  state  treasurers  the 
names  of  resident  stockholders  might  furnish  an  opportunity 
to  the  states  to  tax  the  bank  indirectly  by  taxing  its  stock. 
Had  the  bill  been  approved,  the  bank  would  have  lost  none 
of  its  usefulness,  and  a  marked  improvement  of  the  currency 
would  have  resulted,  to  such  an  extent,  indeed,  that  the  cur- 
rency of  1837  would  have  been  easily  convertible,  elastic, 
undepreciated,  and  little  liable  to  over-issue. 

What  would  Jackson  do  with  the  bill?  Well-informed 
men  on  both  sides  were  confident  that  he  would  veto  it. 
On  May  31  Cadwalader  declared  that  the  veto  was  certain. 
"I  say  the  veto— tor  VETO  IT  WILL  BE!"  he  exclaimed.2 
Biddle  was  almost  as  certain  as  Cadwalader.3  Robert  Pat- 

1  The  provision  as  first  introduced  fixed  the  term  of  holding  at  two  years,  which 
would  in  all  probability  have  completely  checked  loans  on  real-estate  security. 

2  To  Biddle,  May  31  [1832],  B.  P.  3  To  Cadwalader,  July  3, 1832,  ibid. 


STRUGGLE  FOB  THE  CHARTER  239 

terson,  a  friend  of  Biddle,  tried  to  persuade  the  president 
that  he  should  affix  his  signature,  and  thought  that  the  diffi- 
culties and  objections  were  not  "  insuperable." l  But  he  was 
mistaken,  for  on  the  10th  of  July  the  president  returned  the 
bill  to  the  Senate  with  his  objections.2 

The  financial  and  constitutional  arguments  of  this  famous 
message  have  been  keenly  criticised,  and,  whatever  may  be 
the  validity  of  its  constitutional  objections,  its  economic 
reasoning  is  in  the  main  beneath  contempt.3  But  the 
reasoning  was  its  least  valuable  part,  for  it  appealed  to  a 
clientele  which  was  utterly  incapacitated  from  distin- 
guishing truth  from  falsehood  in  matters  so  abstruse,  but 
understood  completely  the  arguments  which  appealed  to 
Jackson  himself.  To  be  told  that  the  charter  would  present 
"a  gratuity  of  many  millions  to  the  stockholders,"  of 
whom  the  holders  of  "more  than  eight  millions"  were 
foreigners,  and  that  this  gratuity  "  must  come  directly  or 
indirectly  out  of  the  earnings  of  the  American  people ; "  that 
the  stock  would  "be  worth  10  or  15  per  cent  more  to 
foreigners  than  to  citizens  of  the  United  States;"  that 
such  grants  had  a  tendency  "  to  make  the  rich  richer  and 
the  potent  more  powerful;"  that  in  case  of  war  with  a 
foreign  nation,  a  bank  "almost  wholly  owned  by  subjects" 
of  that  nation  "  would  be  more  formidable  and  dangerous 
than  the  naval  and  military  power  of  the  enemy ; "  that  the 
bank's  loans  in  the  West  involved  "  a  burden  upon  their 
industry  and  a  drain  of  their  currency "  —  all  this,  though 
demonstrably  and  grossly  false,  seemed  comprehensible  and 
was  certainly  terrifying,  and  the  masses  were  grateful  to 
learn  these  things  which  had  been  hidden  from  the  wise 
and  prudent  and  revealed  unto  Andrew  Jackson. 

i  To  Biddle,  June  21, 1832,  ibid.         2  Messages  and  Papers,  Vol.  II,  pp.  576  ff. 

3  Livingston,  who  wrote  many  of  the  president's  papers,  seemed  to  consider  it 
necessary  to  deny  that  he  had  anything  to  do  with  this. —  Livingston  to  Dallas, 
Aug.  26, 1832,  HUNT,  Livingston,  pp.  370,  371.  Taney  was  one  of  the  contributors.— 
TYLER,  Memoir  of  R.  B.  Taney,  p.  181. 


240  THE  SECOND  BANK  OP  THE  UNITED  STATES 

The  message  was  even  stronger,  and  certainly  more 
defensible,  in  its  attack  upon  the  charter  as  a  monopoly 
granting  privileges  to  a  favored  few,  and  therefore  opposed 
to  the  principles  of  democracy  and  dangerous  to  the  govern- 
ment and  country.  It  is  hard  to  believe,  however,  that 
there  was  much  weight  in  this  strain  of  argumentation,  but 
it  was  very  influential  with  the  people. 

Of  the  other  objections  little  need  be  said  :  The  presi- 
dent asserted  that  the  bill  favored  state  banks  as  against 
individuals  ;  that  the  bonus  was  too  small,  the  capital  too 
large ;  that  the  institution  was  dangerous  to  the  rights  of 
the  states  because  they  were  not  permitted  to  prohibit  the 
placing  of  branches  in  their  territory,  or  to  tax  it;  that  it 
was  virtually  a  foreign  bank;  that  it  was  not  necessary  to 
the  government;  that  it  was  unconstitutional;  and  that  he 
could  have  furnished  a  better  plan  had  he  been  called  upon 
to  do  so. 

The  strength  of  the  veto  consisted  in  its  appeals  to  Ameri- 
cans against  foreigners ;  to  the  poor  against  the  rich ;  to  the 
West  against  the  East;  to  the  democracy  against  privilege. 
These  were  powerful  sentiments,  and  once  thoroughly 
aroused  were  certain  to  overthrow  the  bank. 

The  blindness  of  the  bank's  supporters  was  ludicrous  and 
almost  pathetic.  Cadwalader  said  the  bank's  life  depended 
"on  getting  the  veto  now  —  so  that  the  nation  may  be 
roused  before  the  autumnal  elections  ....  if  vetoed  now 
I  should  feel  sanguine  as  to  the  two  thirds  of  the  new 
Congress."  Regarding  the  message  from  the  point  of  view 
of  intelligent  men,  the  bank's  partisans  exulted,  considering 
it  as  utterly  contemptible,  and,  instead  of  perceiving  the 
peril  which  lurked  in  its  appeal  to  popular  prejudices  and 
to  the  democratic  passion  for  equality,  they  thought  it  so 
anarchical  that  everyone  would  reject  it,  and  they  conse- 

iTo  Biddle,  May  31  [1832],  B.  P. 


STRUGGLE  FOB  THE  CHARTER  241 

quently  circulated  30,000  copies  of  it  as  a  campaign  docu- 
ment calculated  to  "  damn  the  administration  wherever  it 
was  read." *  Biddle  considered  the  effect  of  the  veto  as  all 
that  "  the  friends  of  the  Bank  and  of  the  country  could 
desire;"  he  was  "delighted"  with  the  message:  "It  has  all 
the  fury  of  a  chained  panther,  biting  the  bars  of  his  cage. 
It  is  really  a  manifesto  of  anarchy,  such  as  Marat  or  Robes- 
pierre might  have  issued  to  the  mob  of  the  Faubourg  St. 
Antoine." 2  The  general  contempt  of  the  bank's  adherents 
was  well  expressed  by  one  of  them: 

This  document  ....  will  probably  be  kept  in  memory 

and  often  appealed  to  as  a  curious  example  of  the  extent  to  which, 
at  the  commencement  of  the  nineteenth  century,  the  elected  chief 
magistrate  of  a  free,  civilized  and  enlightened  people  dared  to 
insult  the  common  sense  and  moral  feeling  of  his  constituents.3 

After  the  message  was  received,  a  number  of  speeches 
was  made  in  the  Senate  to  furnish  campaign  material,  for 
no  one  expected  that  the  bill  could  be  passed  over  the  veto, 
and  it  finally  failed  by  the  Senate's  vote  of  22  to  19.* 

In  the  campaign  which  immediately  followed  the  bank 
was  the  paramount  issue,  and  it  was  soon  evident  that  the 
veto,  instead  of  providing  a  congressional  majority  of  two- 
thirds  for  the  bank,  had  lifted  Jackson  to  the  summit  of 
popularity,5  for  the  election  closed  with  his  overwhelming 

1  PAETON,  Vol.  Ill,  p.  411.    The  accounts  of  the  bank  contained  an  item  of  $558 
paid   for  "  printing  Gen.  Jackson's  veto,  30,000  copies,  wrapping  and  distributing 
them."— S.  D.  17, 23d  Cong.,  2d  Sess.,  p.  325.    See  Watmough  to  Biddle,  Sept.  25, 1832, 
B.  P.    "  May  I  beg  the  favor  of  you  to  send  me  this  afternoon  another  ample  supply 
of  the  Veto  document  ....  It  is  an  admirable  paper  and  is  attended  with  the  best 
effects." 

2  To  H.  Clay,  Aug.  1, 1832,  Clay's  Correspondence,  p.  341. 

3  Pamphlet  on  The  Conduct  of  the  Administration,  pp.  57,  58. 
*  Senate  Journal,  22d  Cong.,  1st  Sess.,  p.  463. 

5  Jackson  was  much  more  clear-sighted  in  this  respect  than  his  opponents.  Writ 
ing  to  Lewis,  Aug.  9, 1832,  he  said :  "  With  my  sincere  respects  to  Kendall  &  Blair,  tell 
them  the  veto  works  well,  &  that  the  Globe  reVolves  with  all  its  usual  splendor  — 
That  instead,  as  was  predicted  &  expected  by  my  enemies,  &  some  of  my  friends, 
that  the  veto  would  destroy  me,  it  has  destroyed  the  Bank." — SDMNEE,  Jackson 
(revised),  p.  326,  quoting  Ford  manuscripts,  now  in  possession  of  the  New  York 
Public  Library.  See  Bulletin  of  New  York  Public  Library,  Vol.  IV,  No.  9,  pp. 
299,300. 


242  THE  SECOND  BANK  OF  THE  UNITED  STATES 

triumph,  219  electoral  votes  being  cast  for  him  against  49 
for  Clay.1  As  Biddle  had  clearly  foreseen,  the  victorious 
general  accepted  the  result  as  a  distinct  approval  of  his 
veto  and  a  mandate  to  complete  the  work  so  nobly  begun. 
He  was  justified  in  so  regarding  it.  Biddle  had  committed 
a  monstrous  error  with  his  eyes  wide  open — he  had  applied 
for  a  re-charter  at  a  moment  which  precipitated  the  question 
into  politics.  The  bank  war  began  at  that  point.  Thence- 
forth the  bank  acted,  not  as  a  business  corporation  should 
act,  but  as  a  body  possessing  political  functions  and  created 
for  political  purposes;  it  divided  the  Democratic  party  into 
bank  and  anti-bank  factions,  and  drove  Jackson  to  the  wall. 
It  is  no  wonder,  therefore,  that  Jackson  was  infuriated  and 
determined  to  crush  the  bank.  Had  he  failed  to  act  as  he 
did,  he  would  have  been  inconsistent  and  lacking  in  moral 
courage  —  he  would  not  have  been  Andrew  Jackson. 

i  The  new  House  of  Representatives  stood  140  for  Jackson,  100  opposed.— NILES, 
Vol.  XLV,  p.  228,  note. 


CHAPTER   XI 

THE  CHARGES  AGAINST  THE  BANK 

THE  subject  in  connection  with  the  bank  which  always 
arouses  most  interest  is  its  alleged  corrupt  connection  with 
politics.  It  may  be  said  at  once  that  there  never  has  been 
any  evidence  produced  to  show  that  the  bank  as  a  national 
bank  ever  spent  a  dollar  corruptly.  Yet  the  accusation 
was  repeated  so  often  that  historians  have  been  inclined 
to  accept  as  proved  what  was  only  vehemently  asserted, 
and  it  begot  an  incurable  suspicion  which  has  endured  to 
this  day. 

It  is  self-evident  that  the  bank  would  be  affected  by 
political  considerations,  since  from  the  beginning  to  the  end 
of  its  existence  it  was  to  a  large  extent  subject  to  the  will 
and  whim  of  politicians,  and  it  was  frequently  attacked  by 
them.  Had  the  board  of  directors  been  composed  exclu- 
sively of  canonized  saints,  still  the  conciliation  of  politicians 
and  political  forces  would  have  been  necessary.  The  only 
question  worthy  of  discussion  is  that  of  the  bank's  honesty 
or  corruption  in  this  situation. 

Biddle  in  1829  rejected  as  totally  inadmissible  any 
attempt  to  create  boards  on  which  the  political  parties  were 
fairly  balanced,  and  declared  that  political  affiliations  should 
not  be  considered  in  such  selections.  He  was  right  in  this ; 
but  it  must  not  be  supposed  that  the  proposition  of  a  politi- 
cal balance  was  novel,  or  that  Jackson  Democrats  first  sug- 
gested it,  or  that  there  was  any  moral  obliquity  in  such  an 
arrangement.  When  the  first  government  directors  were 
named,  President  Madison  frankly  selected  them  all  from 
his  own  political  party,  and  the  private  stockholders,  quite 

243 


244  THE  SECOND  BANK  OP  THE  UNITED  STATES 

certain  that  the  bank  must  either  be  a  political  machine  or 
possess  a  balance  of  parties,  elected  ten  Republicans  and 
ten  Federalists  as  their  members  of  the  board.  Madison 
and  his  capable  and  honest  secretary,  A.  J.  Dallas,  then 
struggled  successfully  to  secure  the  presidency  of  the  bank 
for  a  Republican  partisan  of  no  particular  ability  or  experi- 
ence as  a  banker,1  and  thus  the  disasters  consequent  upon 
the  presidency  of  William  Jones  are  primarily  chargeable 
to  James  Madison  and  Alexander  James  Dallas. 

The  policy  of  political  balance  then  inaugurated  was 
religiously  pursued  all  through  the  administration  of  Wil- 
liam Jones,  and  certainly  through  part  of  that  of  Langdon 
Cheves.  Writing  to  Biddle  in  1820,  John  McKim  urges 
him  to  assist  in  the  election  of  a  Republican  director  at 
Baltimore,  "as  you  know  that  the  Republicans  are  one  short 
of  their  number,  and  the  necessity  of  giving  us  our  share  of 
the  Directors,  as  we  do  hold  more  than  the  half  of  the  stock, 
and  it  having  been  Policy  to  divide  the  two  Partys  in  the 
direction,  since  the  Bank  was  established."2  When  this 
equal  division  ceased  it  is  not  possible  to  say,  but  it  may  be 
reasonably  presumed  that  the  disintegration  of  parties  under 
Monroe  caused  its  cessation. 

Biddle  was  opposed  to  the  practice,3  and  fought  against 
it  strenuously  when  it  was  suggested  in  the  case  of  the 
Kentucky  branches  and  the  branch  in  New  Hampshire  in 
1829.  He  then  stated  that  he  considered  such  an  arrange- 
ment as  largely  responsible  for  the  bank's  losses  in  the  West 
in  the  early  years  of  its  career.4  As  to  his  rumored  desire 

i  See  p.  22  for  the  evidence.  2  Jan.  8, 1820,  B.  P. 

3  "  The  truth  is,  that  every  day's  experience  satisfies  me,  that  the  safety  of  the 
Bank,  lies  in  its  complete  estrangement  from  politics."— Biddle  to  R.  Smith,  Feb.  5, 
1829,  ibid. 

'"The  truth  is,  that  almost  all  the  misfortunes  of  the  Bank  of  the  United 
States,  are  traceable,  directly  or  indirectly,  to  politics.  In  Kentucky  the  losses  were 
in  a  great  measure  incurred  by  loans  to  prominent  politicians  of  all  sides  whose 
influence  procured  them  undue  facilities  which  ended,  as  frequently  happens  in  such 
cases,  by  ruining  them  as  well  as  crippling  the  Branches.  These  things  have  made 


CHARGES  AGAINST  THE  BANK  245 

to  have  the  bank  anti-Jackson,  he  repudiated  it  altogether, 
and  constantly  wondered  why  anyone  could  suppose  that  a 
bank  would  care  which  political  party  was  up  or  which  was 
down.  He  was  never  weary  of  quoting  Dean  Swift's  remark 
that  "money  is  neither  Whig  nor  Tory,"  and  in  asserting 
that  "men  will  lend  where  they  are  sure  of  getting  back 
their  money  with  a  profit."  This  was  sound  sense,  and  hold- 
ing these  opinions  with  deep  conviction  Biddle  was  anxious 
above  all  to  exclude  political  considerations. 

Nevertheless  he  was  not  able  to  carry  out  his  wishes 
altogether.  During  Adams's  administration  members  of  the 
party  in  power  were  no  less  ready  to  complain  and  to 
demand  assistance  from  the  bank  than  were  the  Jackson 
politicians  later.  Biddle  repulsed  them  with  as  little  cere- 
mony as  he  repulsed  Ingham,1  yet  he  was  compelled  to 
consider  political  affiliations  in  the  appointments  to  the 
boards  all  through  his  presidency.  In  January,  1824,  there 
was  dissatisfaction  in  Boston  with  the  political  complexion 
of  the  directorate  there,  and  B.  W.  Crowninshield  was 
substituted  for  a  Federalist  on  the  parent  board  in  order  to 
give  the  other  party  a  chance  and  to  assuage  "  feelings  which 
may  hereafter  grow  into  hostility." 2  Again  in  1828  he 
retained  the  services  of  C.  P.  White  at  New  York  because  it 
was  not  expedient  to  "alienate  a  member  of  the  Board  at 
such  a  time — to  offend  personally  a  member  of  that  Con- 
gress before  whom  the  Bank  may  probably  come  for  a 
renewal  of  its  charter,"  3  while  in  November,  1832,  he  was 

us  sensitive  on  that  point,  and  unwilling  to  see  any  great  political  influence  intro- 
duced, which  might  lead  to  a  recurrence  of  similar  misfortunes." — Biddle  to  John 
McLean,  Jan.  10, 1829,  confidential,  ibid. 

1 "  I  will  not  give  way  an  inch  in  what  concerns  the  independence  of  the  Bank, 
to  please  all  the  Administrations  past,  present  or  future. 

"  The  bigots  of  the  last  reproached  me  with  not  being  for  them  —  the  bigots  of 
the  present  will  be  annoyed  that  the  Bank  will  not  support  them. 

"  Be  it  so.  I  care  nothing  for  either  class  of  partisans  and  mean  to  disregard 
both."— Biddle  to  Dickins,  Sept.  16, 1829,  P.  L.  B.,  Vol.  Ill,  p.  67. 

2  Biddle  to  David  Sears,  of  Boston,  Jan.  5, 1824,  ibid.,  Vol.  I,  p.  90. 

8  To  I.  Lawrence,  Nov,  28, 1828,  private,  ibid..  Vol.  II,  pp.  434,  435. 


246  THE  SECOND  BANK  OP  THE  UNITED  STATES 

anxious  "to  conciliate  gentlemen  who  may  be  useful  to  the 
institution." 

It  will  be  observed,  however,  that  there  was  no  plan  of  a 
political  balance  in  these  instances.  Another  conclusion 
must  also  be  drawn,  that,  so  far  from  trying  to  constitute  his 
boards  all  of  one  political  party,  as  the  Jackson  politicians 
asserted,  Biddle  took  unusual  pains  to  appoint  members  of 
the  various  parties  when  he  could  secure  those  who  were 
qualified  for  the  positions.  After  the  correspondence  with 
Ingham  and  the  reiterated  charges  of  doing  precisely  what 
he  wished  to  avoid,  Biddle  introduced  additional  Jackson 
politicians  into  the  boards.  He  did  this  at  Baltimore,2  at 
New  York,3  at  New  Orleans,4  at  Portsmouth,5  at  Nash- 
ville,6 at  Lexington,7  and  at  Utica.8  He  allowed  Lewis  to 

i "  In  the  choice  of  our  Directors  it  often  becomes  necessary  to  conciliate  gentle- 
men who  may  be  useful  to  the  institution  —  and  to  be  very  careful  not  to  alienate  our 
friends.  At  the  present  moment  it  is  especially  desirable  to  avoid  everything  which 
might  estrange  those  who  are  engaged  in  a  cordial  and  warm  support  of  the  Bank." 
—  To  M.  Robinson,  Nov.  30, 1832,  P.  L.  B.,  Vol.  IV,  p.  328. 

2  Biddle  to ,  of  Baltimore,  Nov.  22,  1829,  DAWSON,  Historical  Magazine,  2d 

ser.,  Vol.  IX,  pp.  10, 11. 

3 "On  examining  your  list  of  Directors,  it  struck  me  that  it  might  be  liable  to 
the  reproach  of  being  exclusively  composed  of  gentlemen  of  one  political  party.  I 
have  but  a  moment  to  ask  you  and  Mr.  Robinson  to  name  two  or  three  gentlemen 
who  are  considered  friendly  to  the  present  Administration  who  would  make  good 
Directors."— Biddle  to  I.  Lawrence,  Nov.  27, 1829,  P.  L.  B.,  Vol.  Ill,  p.  96. 

*  "  You  will  not  be  displeased  to  know  that  at  the  last  meeting  of  the  Board, 
Martin  Gordon  and  Maunsel  White  were  two  of  the  four  new  members  elected  as 
Directors  of  the  office  at  New  Orleans." — Biddle  to  Lewis,  Nov.  29, 1829.  ibid.,  p.  97. 

5 Biddle  to  Cadwalader,  Aug.  28, 1829,  B.'P. 

6  Biddle  asked  Lewis's  opinion  about  the  Nashville  board,  Oct.  14, 1828  (P.  L.  B., 
Vol.  Ill,  p.  75)  ;  and  again  in  April. — Same  to  same,  April  27,  ibid.,  p.  229.    Lewis  sent 
a  list  of  names  for  members  of  that  board  May  3, 1830. —  Lewis  to  Biddle,  B.  P. 
Biddle  received  it  with  thanks.— To  Lewis,  May  8,  1830,  private,  P.  L.  B.,  Vol.  Ill, 
pp.  239, 240.    On  May  24  he  sent  Nichol's  list  to  Lewis,  and  asked  for  Lewis's  opinion 
of  it. — Same  to  same,  private,  ibid.,  p  249.    Lewis  violently  opposed  the  nomination 
of  any  of  Governor  Carroll's  friends. — Same  to  same,  June  11, 1830,  confidential,  ibid., 
p.  270.    When  asked  for  reasons,  Lewis  said  that  the  person  to  be  appointed  was 
obnoxious  to  the  friends  of  the  present  administration. —  Lewis  to  Biddle,  June  13, 
1830,  B.  P.    Biddle  assured  Lewis  that  his  wishes  should  be  respected. — To  Lewis, 
June  21,  1830,  P.  L.  B.,  Vol.  Ill,  p.  274.     Governor    Carroll's  nominees  were  not 
appointed.— Biddle  to  Carroll,  June  22, 1830,  ibid.,  pp.  279,  280. 

7  Lewis  sent  a  list  of  directors  for  the  Lexington  branch  early  in  1830.— Biddle  to 
Lewis,  Feb.  24, 1830,  ibid.,  p.  185. 

8  General  P.  B.  Porter  was  not  to  be  chosen  president  because  of  his  anti-Jack- 
son affiliations.— Biddle  to  Porter,  Sept.  23, 1829,  ibid.,  p.  70. 


CHARGES  AGAINST  THE  BANK  247 

name  most  of  the  members  of  the  Nashville  board,1  took 
his  advice  about  the  Lexington  branch,  and  ceased  his  com- 
placency only  when  he  saw  reason  to  suspect  that  the  wily 
major  would  soon  be  naming  all  the  western  directorates. 
In  August  Lewis  wrote  saying  that  he  was  half  ashamed  to 
ask  for  further  favors,  but  that  "  Our  friends  at  Louisville, 
Kentucky,  think  they  are  not  fairly  and  equally  represented 
in  your  Branch  at  that  place,"  and  he  forwarded  the  names 
of  three  gentlemen  whose  appointment  would  probably 
"  give  entire  satisfaction  to  the  friends  of  the  administration 
in  that  part  of  the  state." 2  This  further  encroachment  upon 
the  province  of  the  bank  exhausted  the  patience  of  its  much- 
enduring  head,  and  he  politely  declined  to  introduce  "  new 
members  ....  for  the  purpose  of  making  any  political  bal- 
ance."3 The  refusal  is  creditable  to  Biddle;  it  proves  that 
he  would  not  be  subservient  to  the  administration  even  at  a 
most  critical  moment  in  the  bank's  attempts  to  secure  Jack- 
son's assent  to  a  re-charter,  and  that  he  was  fixed  in  his 
determination  that  the  bank  should  not  degenerate  into  a 
political  machine. 

It  may  be  argued,  however,  that  while  the  parent  board 
was  free  from  political  chicane  and  bias,  the  local  boards 
were  not.  Such  arguments  are  undoubtedly  applicable  to 
the  early  years  of  the  bank,  because  in  the  southern  and 

1  Lewis  ought  to  be  satisfied,  "  for  out  of  the  whole  Board,  a  very  large  propor- 
tion are  of  gentlemen  nominated  by  yourself." — Biddle  to  Lewis,  June  22,  1830, 
ibid.,  p.  277. 

2"  You  have  conferred  upon  me  so  many  and  such  great  favours  I  am  almost 
ashamed  to  ask  for  any  additional  ones.  But  still  I  must  ask  one  more  of  your 

Board I  have  been  furnished  with  the  names  of  three  gentlemen,  who,  if 

appointed  Directors  for  the  next  year,  in  your  Louisville  Branch,  I  have  reason  to 
believe  will  give  entire  satisfaction  to  the  friends  of  the  administration  in  that  part 
of  the  state."— To  Biddle,  Washington,  Aug.  18, 1830,  B.  P. 

3 "To  introduce  new  members — members  not  so  well  qualified  as  those  now 
there,  for  the  purpose  of  making  any  political  balance,  would  be  wrong  in  itself  and 
would  expose  us  to  the  very  imputation  we  wish  to  avoid  of  looking  to  party  con- 
siderations. On  the  whole  therefore  I  thought  it  better  to  let  the  business  consid- 
erations prevail  over  politics."— To  Lewis,  Oct.  31,  1830,  P.  L.  B.,  Vol.  Ill,  circa 
p.  370. 


248   THE  SECOND  BANK  or  THE  UNITED  STATES 

western  states  campaigns  at  times  revolved  about  banking- 
questions  and  would  involve  the  institution  despite  itself. 
Every  officer  and  employee  of  the  Bank  of  the  United  States 
must  have  been  on  one  side  during  the  struggle  between  the 
new  and  the  old  court  parties  in  Kentucky,  and  such  occur- 
rences would  lead  to  the  conviction  that  the  bank  spent 
money  for  the  purpose  of  controlling  elections  which  were 
vital  to  its  interests.  It  is  also  certain  that  a  board  of 
directors  composed  of  intelligent  business  men  would  con- 
tain few  members  of  the  Jackson  Democracy — a  condition 
which  would  incur  suspicion  of  political  favoritism.1  As  the 
bank's  loans  would  be  made  mostly  to  the  same  class  as  that 
from  which  the  directors  were  selected,  a  charge  of  discrimi- 
nating against  Democrats  would  inevitably  arise. 

Consequently  assertions  of  corruption  at  the  branches 
were  frequently  made.  As  early  as  1825  it  was  insinuated 
that  the  president  of  the  Washington  branch,  though  recog- 
nized as  incompetent,  had  retained  possession  of  his  office 
because  of  his  influence  with  the  Monroe  administration.2 
In  regard  to  Kentucky  frequent  charges  of  unjustifiable  politi- 
cal activity  were  made.3  Blair  asserts  of  his  own  knowledge 

1 "  And  the  only  reason  why  more  Jackson  men  have  not  been  recommended,  is, 
that  it  so  happens  that  a  large  majority  of  the  most  respectable  merchants  belong 
to  the  other  party."—  Shippen,  cashier  of  Louisville  branch,  to  Biddle,  Jan.  26, 
1829,  S.  D.  17,  23d  Cong.,  2d  Sess.,  p.  303. 

2  "  Mr.  Swann  has  been  heard,  as  I  was  credibly  informed,  to  drop  hints  and 
threats,  of  its  being  in  his  power  to  turn  the  whole  weight  and  influence  of  the  execu- 
tive against  Mr.  Biddle  so  as  to  endanger  his  re-election  as  president  of  the  mother 
bank.    One  thing  is  notorious  here,  that  the  executive  influence,  in  all  its  ramifica- 
tions, was  decidedly  exerted  to  uphold  the  election  of  Mr.  Swann ;  I  refer  here  to  the 
late  administration."—  R.  C.  Weightman  to  the  stockholders  of  the  Bank  of  the 
United  States,  July  26, 1825,  p.  9. 

3  "Dear  Sir  —  In  the  summer  of  1828, 1  was  informed  by  Mr. ,  of  Frankfort, 

that  on  the  Sunday  preceding  the  election  in  1825,  it  was  determined  by  two  direc- 
tors of  the  United  States  branch  bank  at  Louisville,  where  he  then  resided,  to  appro- 
priate $250  of  a  certain  contingent  fund,  or  secret  service  money,  belonging  to  the  bank, 
of  which  fund  they  had  the  control,  to  aid  the  party  called  the  old  court  party, 

in  carrying  the  elections  in  Jefferson  county.    Mr. further  stated  that  $100  of 

the  money  was  put  into  the  hands  of  himself  and  another  gentleman  on  that  day, 
that  they  went  to  Shippingsport  and  opened  grog  shops  with  it,  and  hired  hacks  to 
carry  up  voters ;  that  the  balance  was  put  into  the  hands  of  others  for  like  purposes, 


CHARGES  AGAINST  THE  BANK  249 

that  "bank  men  "  employed  bribes  to  influence  the  elections,1 
though  the  phrase  "bank  men"  is  scarcely  sufficient  to 
include  officers  of  the  bank.  Like  assertions  were  made  in 
reference  to  Louisiana.2  From  South  Carolina  reports  came 
of  officials  of  the  branch  engaging  actively  in  politics.3  Hill, 
of  New  Hampshire,  declared  in  the  Senate  that  the  Ports- 
mouth office  "  was  made  a  party  engine  "  in  1828,  and  that 
"  it  was  the  principal  instrument "  in  carrying  the  state  for 
Adams;*  while  Clayton,  of  Georgia,  asserted  that  the  presi- 
dent of  the  Norfolk  branch  had  engaged  most  offensively  in 
politics,  publicly  declaring  that  he  was  "opposed  to  General 
Jackson,"  and  becoming  involved  in  fisticuffs  as  a  result.5 

These  are  the  specific  charges  of  political  action  which 
admit  of  examination.  The  charge  against  the  president  of 
the  Washington  office  is  of  no  moment.  He  did  indeed 
exert  his  supposed  influence  with  the  administration  to 
secure  his  election  to  the  local  board,  and  was  severely 

in  Louisville ;  that  they  did  employ  with  that  money  all  the  hacks  in  the  place,  and 
to  use  his  own  expression, '  did  a  main  business  on  Sunday.' 

"  Not  being  authorized   to  use  this  information  on  Mr.  's  authority,  I 

requested  Mr.  Gilly  Cuddy  to  prove  it,  if  possible,  through  other  channels,  and 
these  are  facts  to  which  he  alludes. 

"  Very  respectfully, 

"  AMOS  KENDALL." 
—  Letter  furnished  by  Amos  Kendall,  NOT.  23, 1829,  NILES  Vol.  XLII,  p.  315,  note. 

i "  Wo  have  known  rifle  guns,  horses,  and  pieces  of  furniture,  presented  by 
Bank  men  to  certain  active  and  zealous  neighborhood  talkers,  opposed  to  the 
Bank."—  Extra  Globe,  Vol.  I,  p.  177,  Sept.  8, 1834. 

zingham,  NILES,  Vol.  XLII.  p  315,  and  B.  P. 

3"!  have  recently  received  a  pamphlet,  ....  which  contains  the  following 
passages:  ....  the  president  of  the  bank  of  the  United  States,  was  not  less  acti  ve,  and 
the  head  which  presides  over  this  great  Federal  institution,  was  seen  superintending 
with  an  anxious  scrutiny,  the  polls  at  the  election." — Biddle  to  Joseph  Johnson,  presi- 
dent of  Charleston  branch,  Sept  27, 1830,  S.  D.  17,  23d  Cong.,  2d  Sess.,  p.  308. 

*  June  8, 1832,  C.  D.,  Vol.  VIII,  Part  I,  p.  1062. 

5  "  The  president  of  the  Norfolk  branch  did  in  person  attend  the  polls,  at  an 
•election  for  the  member  of  Congress,  challenged  the  voters  as  they  came  up  to  the 
clerk's  table,  some  he  changed,  and,  when  reproached  for  his  conduct,  he  stated  that 
he  was  indifferent  as  to  the  candidates  individually,  but  he  stood  there  opposed  to 
General  Jackson.  This  course  of  conduct  produced  great  excitement,  which  termi- 
nated in  a  fight  between  the  president  of  the  bank  and  the  person  who  reproached 
Mm,  immediately  in  the  presence  of  the  managers." — Ibid.,  Part  II,  p.  1994. 


250  THE  SECOND  BANK  OP  THE  UNITED  STATES 

censured  for  doing  so  by  the  president  of  the  bank.1  In  the 
New  Hampshire  case  no  political  acts  were  adduced,  and  the 
only  circumstances  which  gave  color  to  the  assertions  were 
that  the  president  there  was  an  old-time  Federalist  and  a 
friend  of  Webster.  The  New  Orleans  charges  were  admitted 
by  President  Jackson  to  be  baseless;2  those  in  regard  to 
South  Carolina  were  of  a  different  character.  It  was  asserted 
that  the  president  there,  who  was  an  active  politician,  had  been 
seen  "superintending  ....  the  polls  at  the  elections "- 
which  might  well  be  without  involving  the  branch.  Unfor- 
tunately, this  officer  insisted  on  taking  an  active  part  in  the 
heated  campaign  over  nullification  —  opposing  that  heresy 
with  all  his  power.  Biddle  wrote  him  a  letter  requesting 
that  he  refrain  from  such  action,  as  it  was  calculated  to  injure 
the  bank,  and  added,  "no  principle  is  more  fundamental 
than  its  total  abstinence  from  politics." 3  Johnson's  subse- 
quent activity,  however,  occasioned  complaint  on  the  part  of 
Vice-President  Calhoun  and  Senator  Hayne.*  The  charge 
against  the  Norfolk  officer  is  of  the  same  character.  He  was 
at  the  polls  and  opposed  to  General  Jackson,  but  how  this 
involved  the  bank  it  is  difficult  to  see.  In  regard  to  the 
charges  against  the  Kentucky  branches,  Jackson  expressed 
himself  as  satisfied  that  they  were  without  foundation  as  far 
as  the  parent  board  was  concerned.5  The  directors  there 
denied  them ;  while  Biddle  urged  the  officers  to  exercise  care 
in  avoiding  all  cause  for  such  complaints.8 

1  Biddle  to  Swann,  March  17, 1824,  8.  D.  17,  23d  Cong.,  2d  Sess.,  p.  297. 

2  See  p.  188. 

3  Sept.  27, 1830,  S.  D.  17,  23d  Cong.,  2d  Sess.,  p.  308.  See  also  NILES,  Vol.  XLI,  p.  478. 
*  Mr.  Calhoun  said  that "  the  course  taken  by  the  Branch  at  Charleston  may 

have  soured  him  [Hayne],  I  asked  what  it  had  done?  He  said  that  it  had  taken  an 
active  part  in  their  State  politicks,  that  I  ought  to  apprize  you  of  it,— that  you  might 
correct,  and  I  think  he  said,  remove  those  who  had  been  intermeddling." — S.  Smith 
to  Biddle,  Jan.  27, 1831,  B.  P. 

s  See  p.  187. 

«  Biddle  to  the  cashier  of  the  Louisville  branch,  Feb.  12, 1829, 8.  D.  17,  23d  Cong., 
2<1  Sess.,  p.  304. 


CHABGES  AGAINST  THE  BANK  251 

The  actual  status  of  Biddle's  policy  never  showed  better 
than  in  1831,  when  the  charges  against  the  Kentucky  offices 
were  renewed.  Writing  to  him  in  April,  the  cashier  of  the 
Lexington  office  urges  loans  to  help  the  anti-Jackson  candi- 
date, because  funds  were  needed  "to  win  for  our  men." 
The  president  of  the  branch  thought  they  ought  to  be  fur- 
nished, and  "so  does  Mr.  Clay.  The  coming  election  of 
Congressmen  is  all  important  in  its  bearing  on  the  Presiden- 
tial election." l  To  this  Biddle  instantly  and  decisively 
replied:  "I  believe  it  to  be  a  fundamental  principle  in  the 
administration  of  the  Bank  that  its  officers  should  abstain 
from  any  connexion  with  what  are  called  politics,  to  abstain 
not  in  appearance  merely,  but  entirely,  candidly  and 
honestly."2  Thus  at  the  moment  that  Blair  was  charging 
political  corruption  in  Kentucky,  Biddle  refused  assistance 
which  even  Henry  Clay  thought  should  be  granted.  Simi- 
larly in  1832,  after  the  veto,  Biddle  declared  that  the  bank 
would  take  no  active  part  in  the  campaign,  such  action  being 
contrary  to  its  principles.3  To  this  resolution  he  adhered. 

Unquestionably  the  bank  lobbied  in  its  own  interests. 
It  did  this  in  the  New  York  legislature  in  February  and 
March,  1831,  to  hinder  the  adoption  of  resolutions  hostile  to 
it.*  At  the  same  time  it  strove  to  get  through  the  Penn- 
sylvania legislature  a  resolution  in  its  favor,  C.  J.  Ingersoll 
acting  as  its  champion.  Again,  during  the  struggle  for 
re-charter,  Horace  Binney  acted  as  its  manager  at  Washing- 
ton, while  in  1834  the  bank  used  its  influence  with  its 
friends  to  elect  John  Sergeant  senator  from  Pennsylvania. 

1  J.  Harper  to  Biddle,  April  22, 1831,  B.  P. 

2  Biddle  to  James  Harper,  of  Lexington,  Ky.,  May  10, 1831,  P.  L.  B.,  Vol.  Ill,  p.  524. 

3  "  But  political  concerns  must  be  left  to  those  who  are  at  liberty  to  pursue  their 
own  views.    I  am  chained  and  must  obey  the  laws  of  my  station."— To  William  G. 
Buckner,  of  New  York,  July  17, 1832,  ibid.,  Vol.  IV,  p.  261.    Also  same  to  same,  July 
13, 1832,  ibid.,  p.  260;  to  J.  W.  Webb,  July  17,  ibid.,  p.  261. 

«S.  E.  Burrows  to  Biddle,  New  York,  Feb.  17, 1831,  B.  P. 


252  THE  SECOND  BANK  OP  THE  UNITED  STATES 

The  attempt  failed,  but  prevented  Richard  Rush's  election.1 
In  all  these  cases,  however,  there  is  no  reason  to  suspect  the 
use  of  corrupt  means ;  while  the  suspicion  that  it  used  such 
means  to  secure  re-charter  in  1832  is  absolutely  baseless  so 
far  as  all  the  known  evidence  goes.2 

What  the  bank  did  not  do  directly,  it  was  frequently 
charged  with  doing  indirectly.  Its  enemies  declared,  with 
emphatic  repetition,  that  it  secured  the  favor  of  congress- 
men and  politicians  by  granting  them  unusual  accommoda- 
tions on  insufficient  security  and  extending  to  them  favors 
not  granted  to  other  individuals.  It  must  be  admitted  that 
the  bank  was  accustomed  to  give  drafts  for  the  salaries  of 
congressmen,  payable  at  points  distant  from  Washington, 
without  charging  exchange.  Biddle  said  he  knew  of  no 
such  cases,  but  if  they  occurred  they  were  defensible  on 
the  ground  that  congressmen  had  a  right  to  their  pay  wher- 
ever "the  Treasury  chooses  to  give  it  to  them."3  This 
answer  could  hardly  be  considered  satisfatory,  and  the 
assertion  was  frequently  made  that  not  only  did  congressmen 
receive  their  pay  wherever  they  chose  to  demand  it,  thus 
getting  the  benefit  of  the  exchange,  but  that  in  other 
instances  they  were  accommodated  without  being  charged 
exchange.4  Such  a  practice  was  certainly  open  to  the  objec- 
tion of  being  in  the  nature  of  granting  favors  to  those  from 

1  Rush  had  "provocation  from  the  bank  party,  who  defeated  his  election  to  the 
Senate  of  the  United  States  by  the  Legislature  of  Pennsylvania  last  winter." — ADAMS, 
Memoirs,  Vol.  IX,  p.  40. 

2  If  there  had  been  any  evidence,  some  trace  of  it  might  be  expected  among  the 
Biddle   papers,  for  Nicholas   Biddle  saved   absolutely   everything  written,  quite 
regardless  of  its  bearing  upon  his  future  fame.    But  there  is  positively  no  trace  of 
such  attempts  to  be  found  there. 

3  H.  R.  460, 22d  Cong.,  1st  Sess.,  p.  532. 

*"  Were  not  draughts  formerly  furnished  to  Members  of  Congress  without  any 
charge  for  premium,  by  the  United  States  Branch  Bank  in  this  city,  in  exchange  for 
money  paid  into  Bank,  as  well  as  for  their  lawful  pay? 

"  To  this  the  Intelligencer  made  no  reply.  It  was  founded  on  a  knowledge  that 
such  was  the  fact.  Drafts  were  furnished  to  members  of  Congress  without  charge, 
whether  for  their  pay  or  not,  on  every  part  of  the  Union,  while  private  citizens  were 
charged  from  %  to  1  per  cent."—  Extra  Globe,  Vol.  I,  p.  143,  Aug.  23, 1834. 


CHARGES  AGAINST  THE  BANK  253 

whom  favors  were  to  be  expected.  The  same  condemnation 
must  fall  upon  the  practice  of  paying  congressmen  and 
government  officials  before  their  salaries  became  due  by  the 
passage  of  the  general  appropriations  act.  Adams,  a  warm 
champion  of  the  bank,  showed  that  in  a  single  session  the 
amount  thus  advanced  was  almost  $400,000,  "which  was 
equivalent  to  a  loan  without  interest,"  and  that  the  amount 
of  interest  thus  lost  to  the  bank  was  over  $3,000.  He  was 
"not  without  doubts  of  the  propriety  of  this  indulgence."  1 

That  congressmen  were  not  to  borrow  money,  or  that  the 
bank  was  not  to  lend  them  money,  could  hardly  be  argued, 
since  this  would  be  an  unwarrantable  discrimination  against 
congressmen  as  congressmen.  That  the  officers  of  the  bank 
were  willing  to  make  loans  on  easy  terms  to  congressmen  is 
likely,  and  is  illustrated  in  the  case  of  General  Stevens,  to 
whom  Biddle  granted  a  loan  on  his  own  authority,  although 
he  was  a  stranger,  and  although  the  president  did  not  know 
that  the  drawers  of  the  notes  were  of  good  credit.2  In  June, 
1829,  Biddle  justified  a  loan  to  Congressman  Verplanck, 
against  the  objections  of  Robert  Lenox,  partly  on  the  ground 
that  it  was  expedient  for  the  institution  to  stand  well  with 
those  who  held  its  future  existence  in  their  hands,  especially 
as  he  believed  that  "the  loan  was  perfectly  safe."  In  1831 
he  permitted  John  Forsyth  to  borrow  a  large  sum  at  a  long 
date  on  the  security  of  a  mortgage,  though  such  loans  were 
against  the  declared  policy  of  the  bank.4  A  similar  accom- 

1 H.  R.  460,  22d  Cong.,  1st  Sess.,  pp.  392, 567. 

2  Testimony  of  Diddle  and  Cowperthwaite,  ibid.,  p.  190. 

s "In  the  case  you  mention  for  instance  I  think  it  was  well  to  lend  to  Mr. 
Verplanck  the  money  because  the  loan  was  perfectly  safe,  no  matter  for  what  use  he 
meant  to  apply  it.  After  all  you  know  the  existence  of  this  institution  must  depend 
on  the  opinion  entertained  of  it  by  those  who  will  before  long  be  asked  to  continue 
its  Charter  and  altho  I  would  sacrifice  nothing  of  right  or  of  duty  to  please  them  or 
to  please  anybody,  still  if  a  proper  occasion  presents  itself  of  rendering  service  to 
the  interior  proving  the  usefulness  of  the  Bank,  so  as  [to]  convert  enemies  into 
friends,  we  owe  it  to  ourselves  and  to  the  stockholders  not  to  omit  that  occasion." — 
Biddle  to  Robert  Lenox,  June  4, 1829,  P.  L.  B.,  Vol.  Ill,  p.  48. 

*To  J.  Forsyth,  May  9, 1831,  ibid.,  p.  520.  Same  to  same,  June  28, 1831,  ibid., 
Vol.  IV,  p.  3. 


254  THE  SECOND  BANK  OP  THE  UNITED  STATES 

modation  was  granted  to  George  McDuffie  in  1833,  for 
$100,000,  the  agreement  being  to  loan  on  mortgage  and 
to  renew  the  note  indefinitely.1  David  Crockett's  bill  was 
about  to  be  protested,  and  was  renewed  by  Biddle  per- 
sonally to  protect  Crockett,2  and  the  same  favor  was  accorded 
Joseph  Vance.3  In  1826  the  board  released  Senator  Samuel 
Smith  from  his  debt  consequent  upon  the  Baltimore  frauds 
of  1817-19.*  Asbury  Dickins,  first  clerk  in  the  treasury 
and  a  valuable  friend,  was  released  in  1830,  the  bank  saving 
about  half  the  debt.5  Colonel  R.  M.  Johnson  and  his  brother 
were  treated  with  like  kindness  in  1824. 6  All  these  were 
favors  to  men  who  might  be  politically  useful.  Moreover, 
during  the  years  when  the  bank  was  attempting  to  secure  a 
new  lease  of  life,  the  loans  to  congressmen  were  large,  and 
much  beyond  what  had  been  customary  at  earlier  periods.7 
It  must  be  remembered,  however,  that  all  the  loans  of  the 
bank  were  much  more  extensive  than  usual  at  this  time,  and 
hence  those  of  congressmen  might  fairly  be  expected  to  be  so. 
Similarly,  in  settling  the  debts  due  when  the  debtor  could 
not  pay,  congressmen  were  not  the  sole  recipients  of  such 
favor,  but  shared  it  with  hundreds  of  others.  Therefore  no 

i  Biddle  said  the  loan  "  might  be  renewed  till  the  parties  were  prepared  to  pay. 
....  The  renewals  might  be  arranged  in  practice  with  less  inconvenience  than 
might  at  first  be  supposed,  by  leaving  the  bills,  or  any  authority  to  sign  them  with 
the  Cashier."— Biddle  to  McDuffie,  Aug.  29, 1833,  P.  L.  B.,  Vol.  V,  pp.  2,  3. 

2 Biddle  to  Poindexter,  Dec.  13, 1834,  ibid,,  p.  289. 

3  Biddle  to  Joseph  Vance,  Dec.  17, 1834,  ibid.,  p.  292. 

*  Biddle  to  John  Donnell,  of  Baltimore,  Sept.  21, 1826,  ibid.,  Vol.  II,  p.  187. 

5  On  Dickins's  loan  see  R.  Smith  to  Biddle,  Sept.  22, 1828,  B.  P. 

«  Biddle  to  J.  Harper,  of  Lexington,  Ky.,  June  9, 1824,  P.  L.  B.,  Vol.  I,  p.  16 

7  Loans  made  to  members  of  Congress : 

Years  Amounts  Number  of  Members 

1826  $237,436  82 

1827  221,026  25 

1828  218,830  38 

1829  212,346  34 

1830  192,161  52 

1831  322,199  59 

1832  478,069  44 

1833  374,766  58 

1834  238,586  52 

— 8.  D.  17,  23d  Cong.,  2d  Sess.,  pp.  320,  321. 


CHARGES  AGAINST  THE  BANK  255 

censure  is  implied  where  the  favor  was  not  unduly  granted, 
and  the  evidence  of  the  president's  letter  books  is  conclusive 
that  in  all  the  cases  named  full  payment  could  not  be  made. 
Smith's  debts  had  been  contracted  in  1817-19  through  the 
criminality  of  his  mercantile  partner,  and  he  could  not  dis- 
charge them;  Johnson's  indebtedness  had  been  incurred  at 
the  same  time  and  he  was  entirely  bankrupt ;  while  Dickins's 
debt  had  been  contracted  with  the  Bank  of  Columbia,  and 
he  was  never  in  a  situation  to  pay  it. 

On  the  other  hand,  in  the  matter  of  granting  unusual 
loans  to  congressmen,  the  bank  seems  to  have  laid  itself 
fairly  open  to  censure.  Yet  much  of  this  must  be  mitigated 
if  the  loans  were  safe.  Tyler's  committee  in  1834  reported 
on  this  head  that  of  loans  made  by  the  Philadelphia  office 
to  individuals  then  in  Congress  only  $400  had  been  carried 
to  the  account  of  "suspended  debt"  and  one  note  for  $500 
protested.  These  it  considered  debts  which  would  ultimately 
be  paid.  Some  cases  existed  at  the  branches,  but  all  these 
loans  seem  to  have  been  made  "  upon  as  good  security  "  as 
was  customary  in  other  cases.1 

Other  charges  of  indirect  bribery  were  those  of  paying 
excessive  fees  to  lawyers  and  making  donations  of  the  bank's 
money  for  political  effect.  Nothing  of  the  kind  was  dis- 
covered. The  fees  to  lawyers  were  not  excessive.2  No  cases 
of  bribes  by  donations  were  known  by  the  committee  of 
1834,8  and  the  subject  was  carefully  investigated  by  the 
committee  of  1832  with  results  favorable  to  the  bank,  the 
whole  amount  of  donations  from  1817  to  1831  aggregating 
$4,620.*  The  contributions  were  insignificant  and  were 
made  for  the  most  part  to  fire  companies,  or  to  turnpikes, 
with  the  object  of  increasing  the  value  of  real  estate  held 
by  the  bank  or  of  protecting  its  property. 

1 3.  D.  17,  23d  Cong.,  2d  Sess.,  p.  41.          2  n>id.,  p.  42. 

» Ibid.,  p.  39.  *  H.  R.  460, 22d  Cong.,  1st  Sess.,  pp.  74,  75, 


256  THE  SECOND  BANK  OF  THE  UNITED  STATES 

The  most  effective  of  all  the  indictments  against  the  bank 
was  that  it  "subsidized  the  press."  This  was  a  vague  phrase, 
but  it  was  pretty  clearly  understood  by  everybody  and  meant 
that  the  bank  bribed  printers  and  publishers  by  granting 
them  accommodations  on  easy  terms,  with  the  expectation  of 
receiving  their  assistance  in  return.  Of  course,  editors  occa- 
sionally needed  bank  accommodations,  yet,  as  professed 
molders  of  public  opinion,  they  were  first  to  take  sides 
either  for  or  against  the  bank  when  the  subject  of  re-charter 
came  up.  In  this  situation,  a  loan  to  an  editor  favorable  to 
re-charter  would  be  called  a  subsidy,  a  loan  to  an  editor 
opposed  a  bribe.  The  most  prominent  editors  to  secure  large 
loans  were  Duff  Green,  of  the  Washington  Telegraph,  Webb 
and  Noah,  of  the  New  York  Courier  and  Enquirer,  Gales 
and  Seaton,  of  the  Intelligencer,  Robert  Walsh,  of  the 
National  Gazette  and  the  American  Quarterly  Review, 
Thomas  Ritchie,  of  the  Richmond  Enquirer,  Jesper  Harding, 
of  the  Pennsylvania  Enquirer,  and  F.  P.  Blair,  of  the  Globe, 
though  before  he  established  that  paper.1  All  were  promi- 
nent and  able  editors,  some  favorable  to  the  bank,  some 
opposed.  Suspicion  was  also  aroused  by  the  conversion  to 
the  bank's  cause  of  several  editors  who  had  been  unfriendly. 
Duff  Green  ceased  to  oppose ;  while  Webb  and  Noah  became 
active  supporters  instead  of  bitter  opponents. 

Numerous  cases  of  attempts  to  buy  up  editors  were  also 
alleged.  Parton  intimated  that  such  an  attempt  was  made 
on  Blair.2  Blair  himself  makes  charges  of  this  character  in 
reference  to  the  New  York  Evening  Post  and  the  New  York 
Standard,3  and  presents  the  affidavit  of  a  country  editor 

1  Harding,  $36,916.71 ;  Walsh,  $11,541.72;  Green,  $20,000;  Ritchie,  $10,900 ;  Gales  and 
Seaton,  $44,695.    All  made  in  1831  and  1832.— H.  R.  460,  22d  Cong.,  1st  Sess.,  pp.  108-10. 
For  Blair's  case  see  p.  171,  note  1. 

2  "  A  known  friend  of  the  bank  "  offered  to  make  Blair  a  loan  of  $200,  says  Par- 
ton. —  PARTON,  Vol.  Ill,  p.  338.    When  it  is  recollected  that  Blair  had  borrowed  from 
the  bank  and  failed  to  pay,  the  story  loses  its  verisimilitude. 

3 "Silas  E.  Burrows  offered  valuable  pecuniary  considerations  ....  if  they 
would  espouse  the  cause  of  the  Bank."— Extra  Globe,  Vol.  I,  p.  125,  Aug.  15, 1834. 


CHARGES  AGAINST  THE  BANK  257 

declaring  that  "  a  supporter  of  the  Whig,  or  Bank  candi- 
date "  offered  him  $100  and  banking  facilities  at  the  Bank 
of  the  United  States  if  he  would  use  his  influence  for  the 
Whig  candidate.  It  is  apparent  that  all  this  evidence  is  of 
the  flimsiest,  and  does  not  establish  in  a  single  instance  any 
connection  of  the  bank  with  the  alleged  attempts.  In  one 
case  "a  known  friend  of  the  bank"  offers  a  loan,  in  another 
"  Silas  E.  Burrows  "  promises  "valuable  pecuniary  consid- 
erations," and  in  the  third  it  is  "  a  supporter  of  the  Whig  " 
candidate.  That  there  were  editors  who  were  not  averse  to 
receiving  favors  scarcely  needs  to  be  said.  James  Gordon 
Bennett,  who  always  displayed  in  public  the  most  rancorous 
antipathy  for  the  bank,  nevertheless  kept  up  a  friendly  cor- 
respondence with  its  president,  gave  good  advice,  and  on 
one  occasion  defined  his  position  thus:  "Of  course  I  am 
opposed  to  the  Bank  and  must  be  so  —  but  I  suppose  you 
understand  that." J  Three  weeks  later  he  hints  that  he 
needs  money  and  would  like  to  hear  from  Biddle.2  The 
bank  had  nothing  for  him,  however. 

Biddle' s  own  attitude  in  relation  to  "  subsidizing "  the 
press  has  been  incidently  left  on  record  by  himself,  and  does 
honor  to  his  integrity.  In  1828  Webster  urged  upon  him 
the  expediency  of  granting  loans  to  Gales  and  Seaton  in 
order  to  sustain  their  newspaper,  which  might  be  useful  to 
the  bank.  To  this  Biddle  responded  warmly  that  he  could 
not  and  would  not  proceed  on  any  such  principles: 

The  value  of  his  paper  and  the  advantage  of  its  continu- 
ance are  considerations  entirely  foreign  to  us  —  and  the  very 
circumstance  that  but  for  the  Bank  of  the  United  States  any 
newspaper  would  be  discontinued,  or  that  the  Bank  had  gone 
out  of  its  way  in  order  to  sustain  any  newspaper  either  in  ad- 
ministration or  in  opposition  would  be  a  subject  of  reproach 
and  what  alone  makes  reproach  uncomfortable  of  just  reproach.* 

1  Bennett  to  Biddle,  New  York,  Nov.  9, 1832,  B.  P. 

2  Same  to  same,  Dec.  1, 1832,  ibid. 

•Biddle  to  Webster,  Dec.  2, 1828,  P.  L.  B.,  Vol.  II,  p.  448. 


258  THE  SECOND  BANK  OF  THE  UNITED  STATES 

As  this  letter  was  never  intended  for  the  public  eye,  it 
is  the  best  possible  testimony  to  Biddle's  integrity  at  the 
time  it  was  written.  And  yet  it  was  the  untoward  fate  of 
the  man  who  wrote  it,  and  who  in  so  doing  denied  accom- 
modations to  old  and  trusted  friends  at  a  critical  moment  in 
their  fortunes  and  risked  offending  an  intimate  and  power- 
ful advocate,  to  be  generally  regarded  as  a  wholesale  briber 
of  editors  and  publishers. 

Of  all  the  loans  to  editors,  those  to  Webb  and  Noah,  of 
the  New  York  Courier  and  Enquirer,  gained  the  widest 
notoriety  and  created  the  most  intense  feeling.  This  journal 
had  been  pronouncedly  anti-bank  from  November,  1829,  to 
April,  1831.  It  then  changed  its  attitude  and  advocated  a 
new  charter  with  modifications,  though  still  professing  to 
support  Jackson. 

James  Gordon  Bennett,  in  his  Memoirs,  declares  that  the 
paper  was  financially  embarrassed  in  1831,  and  that  Noah, 
seeing  "the  breeches  pocket  of  Mr.  Biddle  open,  entered  it 
immediately."  1  It  is  not  necessary  to  credit  Bennett  with 
extraordinary  veracity,  but  he  was  probably  not  far  wrong. 
Certain  it  is  that  in  the  spring  of  1831  the  proprietors  of  the 
paper  needed  more  funds,  and  one  of  them  decided  to  sell 
out.  At  this  juncture  M.  M.  Noah,  who  was  desirous  of 
buying  up  the  retiring  proprietor's  shares,  met  with  Silas  E. 
Burrows,  and  Burrows,  Webb,  and  Noah  planned  to  raise 
the  necessary  means,  and  "  to  change  the  tone  of  the  Courier 
and  Enquirer "  —  in  other  words,  to  bring  it  out  in  support 
of  the  bank.  Burrows  was  the  pivot  upon  which  all  the  suc- 
ceeding events  turned.  He  was  a  vain,  loquacious,  intruding, 
scheming  merchant,  who  wished  to  be  regarded  as  one  who 
bore  upon  his  shoulders  the  burden  of  empires.  His  letters 
to  Biddle  are  still  extant,  and  are  filled  with  hints  of  myste- 
rious secrets ;  chatter  of  grandiose  plans ;  fulsome  laudation 

i  Memoirs  of  a  Journalist,  p.  150. 


CHARGES  AGAINST  THE  BANK  259 

at  one  moment  and  causeless  reproaches  at  the  next;  abject 
petitions  for  loans  to  be  used  in  airy  ventures ;  denunciations 
of  the  officials  of  the  New  York  branch ;  tales  of  intimacies 
with  presidents  and  ex-presidents ;  boasts  of  imaginary  influ- 
ence over  the  course  of  politics;  and  again  with  exclama- 
tions of  fear  and  violent  assertions  that  he  is  a  persecuted 
and  hunted  man.  They  portray  only  too  clearly  an  indi- 
vidual possessed  of  an  incurably  weak  head. 

When  the  trio  began  operations  for  securing  complete 
possession  of  the  Courier  and  Enquirer,  Webb  mentioned 
to  Burrows  that  he  "was  prepared  to  advocate  a  modified 
recharter  of  the  bank."  Burrows  urged  him  to  come  out  for 
an  "unconditional  recharter,"1  and  promised  Noah  that  he 
would  raise  the  funds  for  the  purchase  of  the  half  interest  in 
the  Courier  and  Enquirer  by  securing  a  loan  from  his  father.2 
This  proposition  was  accepted,  and  Burrows  hurried  off  to 
Philadelphia  to  see  Biddle,  with  the  object  of  securing  the 
money  there  instead  of  from  his  father.  He  told  Biddle 
that  he  wanted  $15,000  for  Noah  to  purchase  "a  share  in  a 
newspaper,"  and  offered  the  notes  of  Noah,  indorsed  by  Webb, 
as  security.  The  Exchange  Committee  of  the  bank  author- 
ized the  loan  at  one  year  and  eighteen  months.  Biddle  then 
furnished  Burrows  with  the  money  out  of  his  own  pocket, 
without  even  seeing  the  notes  to  secure  the  sum,  and  con- 
senting that  Burrows  should  not  indorse  them,  thus  leaving 
the  responsibility  of  payment  with  Noah  and  Webb.3  The 
truth  is  that  Burrows  did  not  then  have  the  notes,  for  he 
took  the  $15,000  to  New  York,  told  Noah  that  he  had  secured 
a  loan  from  his  father,  gave  Noah  his  father's  notes  instead 
of  the  money,  took  Noah's  notes,4  and  then  sent  them  to 
Biddle,  who  held  them  in  his  own  possession  for  over  nine 

1  Examination  of  J.  W.  Webb,  H.  R.  460,  22d  Cong.,  1st  Sess.,  p.  81. 

2  Noah's  affidavit,  April  8, 1832,  ibid.,  p.  95. 
sBiddle's  testimony,  ibid.,  pp.  85,  86. 

*  Noah's  affidavit,  ibid.,  p.  95;  Webb's  testimony,  ibid.,  p.  82. 


260  THE  SECOND  BANK  OF  THE  UNITED  STATES 

months  instead  of  placing  them  in  the  possession  of  the 
bank.1  Here,  then,  was  a  large  loan  made  without  the 
receipt  of  any  security  at  the  time  on  the  notes  of  one  part- 
ner indorsed  by  the  other  —  an  act  in  contravention  of  the 
rules  of  the  bank ;  not  indorsed  by  the  borrower ;  and  for  a 
long  period. 

In  January,  1832,  Biddle  at  last  decided  to  transfer  the 
account  to  the  books,  and  then  the  notes,  instead  of  being 
for  one  year  and  for  eighteen  months,  were  transformed  into 
paper  to  be  paid  at  intervals  of  six  months  until  October, 
1836;  that  is,  for  from  six  months  to  almost  five  years.2 
In  February  the  investigation  of  the  bank  was  discussed  in 
Congress,  and  on  the  2d  of  March  Burrows  took  up  the  notes, 
securing  a  loan  at  the  bank  for  the  purpose,3  so  that  the  loan 
made  to  Webb  and  Noah  was  paid  by  making  a  new  one  to 
Burrows. 

The  precise  relations  existing  between  Biddle  and  Bur- 
rows cannot  be  determined.  In  the  spring  of  1831  Burrows 
had  persuaded  Biddle  that  he  was  a  person  of  vast  though 
undefined  influence  in  New  York  politics,  and  as  at  that 
moment  the  legislature  of  New  York  was  discussing  a  resolu- 
tion denunciatory  of  the  bank,  Burrows  went  to  Albany  to 
attempt  to  prevent  the  action.  It  was  then  that  the  agree- 
ment was  made  with  Webb  and  Noah.  As  Burrows  could 
not  keep  silent,  the  matter  was  at  once  bruited  in  the  public 
press,  whereupon  Biddle  wrote,  asking  Burrows  to  send  him 
a  letter  saying  that  he  had  never  "received  any  authority 
....  from  any  one  connected  with  the  Bank  to  influence 
by  pecuniary  or  other  means  the  course  of  any  newspaper  in 
New  York  or  elsewhere." '  Burrows  did  not  furnish  this  cer- 

1  Biddlc's  testimony,  H.  R.  460,  22d  Cong.,  1st  Sess.,  p.  86. 

2  Ibid.,  p.  553.  3  Biddle's  testimony,  ibid.,  p.  87. 

*  "  And  it  occurs  to  me  that  it  would  be  well  if  you  were  to  write  to  me  stating 
the  fact,  that  altho'  you  are  yourself  indifferent  to  the  allegations  of  this  writer,  yet, 
lest  your  silence  might  be  construed  into  an  acquiescence  in  his  statements,  you 


CHARGES  AGAINST  THE  BANK  261 

tificate  of  good  character ;  but,  on  the  contrary,  denominated 
himself  "  your  agent,  confidential  agent,"  l  and  later,  in  a 
letter  of  passionate,  childish,  and  desperate  reproach,  angrily 
asserted  that  he  was  refused  accommodations  "whilst  the 
Bank  has  stifled  the  press  here  by  rewards  of  fortunes," 
and  transmitted  a  bill  for  services  which  shows  that  Biddle 
had  paid  him  $16,000  and  still  owed  him  $1,100.2  One  week 
later  he  forwarded  another  long  letter  of  reproaches,  and 
hinted  that  he  held  secrets  which  would  bring  a  fortune  to 
himself  and  ruin  to  the  bank;3  in  March,  1832,  on  the  other 
hand,  he  wrote  Biddle:  "All  discounts  made  at  your  bank  to 
me,  have  been  for  my  accommodation,  and  individual  benefit. 
Beyond  this  is  unknown  to  you,  and  is  left  for  me  to  ex- 
plain." '  He  would  not  appear  before  the  congressional 
investigating  committee,  however,  and  "hopes  to  God"  he 
will  not  be  called  on,  and  then  exclaims:  "The  moment  I 
knew  you  had  made  an  entry  of  those  documents,  that  mo- 
ment I  knew  a  fortune  was  at  my  disposal  if  I  would  accept 
of  it,  and  made  without  censure  by  the  world,  as  they  would 
justify  me  for  testifying  to  all." 5 

It  is  difficult  to  assert  anything  with  confidence  in  the 
face  of  such  declarations  from  a  man  of  this  character.  Bur- 
rows may  really  have  thought  that  Biddle  had  agreed  with 
him  to  bribe  the  New  York  press;  the  sums  which  Biddle 

think  it  right  to  say  that  you  have  never  received  any  authority  or  any  request  from 
any  one  connected  with  the  Bank  to  influence  by  pecuniary  or  other  means  the  course 
of  any  newspaper  in  New  York  or  elsewhere."— Biddle  to  Burrows,  April  14, 1831,  B.  P. 

1  Burrows  to  Biddle,  May  25, 1831,  ibid. 

2  The  United  States  Bank  to  S.  E.  Burrows 

To  cash  expended  by  the  directions  of  the  President  at 

various  times $17,100 

Cr  by  Cash  received  of  the  President 16,000 

Due  S.  E.  Burrows  Esq. 1,100 

—  Same  to  same,  New  York,  Nov.  25, 1831,  ibid. 

3  Same  to  same,  Dec.  2, 1831,  ibid. 

*Same  to  same,  New  York,  March  19, 1832,  ibid. 
5  Same  to  same,  March  26,  1832,  ibid. 


262  THE  SECOND  BANK  OP  THE  UNITED  STATES 

had  intrusted  to  his  keeping  show  that  he  was  actually  act- 
ing for  the  bank  in  some  capacity ;  his  remarks  about  the 
money  loaned  to  him  prove  that  Biddle  did  not  know  what 
he  had  done  with  it,  and  the  testimony  of  Noah  and  Webb 
shows  that  he  did  not  transfer  it  to  them.  Biddle' s  friends 
evidently  regarded  Burrows  as  a  bad  character,  for  Bevan 
writes  of  him  as  "  a  troublesome  and  unprincipled  man," ' 
and  later  as  "a  very  dangerous  man,  and  one  in  whom  no 
confidence  can  be  placed,"  at  the  same  time  expressing  a 
wish  that  arrangements  "  could  be  speedily  made  to  get  W. 
and  N.'s  paper  out  of  his  possession."2 

Webb  and  Noah  were  accommodated  with  other  loans. 
In  August,  1831,  they  received  $20,000,  payable  10  per  cent, 
every  six  months.  They  declared  that  they  could  not  secure 
loans  from  the  New  York  banks  because  they  had  supported 
the  bank.3  On  this  occasion  Noah  said  that  their  paper  would, 
if  it  took  part  in  the  agitation  for  re-charter,  "go  as  far  in 
favor  of  the  bank "  as  it  had  done  in  April.4  In  December 
the  partners  were  back  once  more,  this  time  for  $15,000, 
claiming  that  the  bank  was  morally  bound  to  support  them, 
because  their  course  had  cut  them  off  from  assistance  from 
the  New  York  banks.5  The  loan  was  granted  by  the 
Exchange  Committee,  though  at  the  time  the  board  was 
refusing  to  lend  small  sums  to  good  customers  in  Philadel- 
phia.6 In  both  cases  the  notes  were  drawn  by  one  partner 
and  indorsed  by  the  other.7 

Nor  was  this  the  end.  In  July,  1832,  after  the  veto, 
Biddle  twice  brusquely  refused  further  accommodations  to 

iTo  Biddle,  July  18, 1832,  B.  P. 

2  M.  L.  Bevan  to  Biddle,  July  20, 1833,  private,  ibid. 

3  Webb's  testimony,  H.  R.  460,  22d  Cong.,  1st  Sess.,  p.  76;  and  Webb,  Aug.  8, 1831, 
ibid.,  p.  98. 

^  M.  M.  Noah  to  W.  Bowne,  Aug.  5, 1831,  ibid.,  p.  97.    See  Webb's  share  in  secur- 
ing the  loan,  A.  L.  Stewart  to  J.  W.  Webb,  Aug.  5, 1831,  ibid. 
5  J.  W.  Webb  to  Biddle,  Dec.  16,  ibid.,  p.  101. 
e  Ibid.,  p.  107,  Exhibit  A.  1 1bid.,  p.  550. 


CHARGES  AGAINST  THE  BANK  263 

Webb,  whereupon  that  gentleman  threatened  that  unless 
something  was  done  for  him  the  paper  would  support  Jack- 
son.1 Biddle  then  consented  to  see  if  the  loan  could  not  be 
raised  by  one  of  his  friends,2  for  which  kindness  he  received 
the  thanks  of  Webb.8  Whether  anything  was  done  or  not  is 
unknown,  but  Noah  retired  from  the  Courier  and  Enquirer. 
Webb  removed  the  names  of  Jackson  and  Van  Buren  from 
the  head  of  the  editorial  columns  of  the  paper  and  came  out 
in  a  long  article  for  Clay,  Sergeant,  and  the  bank.*  Let  it 
be  added  that  Webb's  notes  for  $18,600  went  to  protest  in 
February,  1833,5  and  that  in  1835  he  offered  to  settle  for  ten 
cents  on  the  dollar.6  It  does  appear  as  if  Biddle  had  become 
sadly  involved  with  the  Courier  and  Enquirer  and  could  not 
extricate  himself.  The  loans  granted  to  the  editors  of  this 
paper  would  assuredly  not  have  been  made  to  others  unless 
similarly  situated. 

It  is  easy  to  conjecture  the  arguments  which  appealed  to 
Biddle  in  this  matter.  He  had  openly  announced  his  belief 
in  the  policy  of  disseminating  knowledge  of  the  bank 
through  the  press,  and  of  the  justice  of  paying  for  such 
publications.  In  this  policy  he  was  supported  by  men  of  the 
most  irreproachable  character,7  and  it  may  be  added  that 

1 "  If  you  think  proper  to  act  in  the  meantime  npon  the  paper  I  handed  yon,  do 
so,  if  not  the  paper  will  then  support  the  measures  of  the  President,  but  I  will  never 
again  write  a  paragraph  in  his  favour."— Webb  to  Biddle,  no  date,  private  and  con- 
fidential, ibid. 

"  If  you  and  your  friends  do  not  enable  me  to  take  the  stand  called  for  by  every 
consideration  of  justice  and  principle,  I  will  turn  the  political  part  of  the  paper  over 
to  Noah ! " — Same  to  same,  July  13, 1832,  ibid.  A  similar  letter  was  written  July  16. 

2  He  sent  the  proposition  to  R.  L.  Colt,  of  Baltimore. — To  Webb,  Aug.  3  and 
Aug.  4, 1832,  P.  L.  B.,  Vol.  IV,  pp.  278,  279. 

s  Webb  to  Biddle,  Aug.  5, 1832,  B.  P.  *  PARTON,  Vol.  Ill,  pp.  428, 429. 

6  S.  D.  17, 23d  Cong.,  2d  Sess.,  pp.  40  and  314.  6  To  Biddle,  Jan.  4, 1835,  B.  P. 

7Calhoun  said:  "But  I  must  say,  in  defence  of  the  bank,  that,  assailed  as 
it  was  by  the  Executive,  it  would  have  been  unfaithful  to  its  trust,  both  to  the 
stockholders  and  to  the  public,  had  it  not  resorted  to  every  proper  means  in  its  power 
to  defend  its  conduct,  and,  among  others,  the  free  circulation  of  able  and  judicious 
publications."— Jan.  13, 1834,  C.  D.,  Vol.  X,  Part  I,  pp.  212,  213. 

The  publications  were  to  be  "  explanatory  of  the  operations  and  conduct  of  the 
bank.  Confined  to  that  object  exclusively."— Biddle  to  John  Tilford,  Sept.  26, 1832, 
S.  D.  17,  23d  Cong.,  2d  Sess.,  p.  322. 


264  THE  SECOND  BANK  OP  THE  UNITED  STATES 

after  the  beginning  of  the  campaign  of  shameless  slander 
and  calumny  inaugurated  by  Blair,  he  was  certainly  not 
without  justification,  and  would  have  been  more  than  an 
ordinary  mortal  had  he  done  otherwise  than  he  did.  But  it 
was  only  one  step  from  this  legitimate  policy  to  that  of  mak- 
ing loans  as  a  sort  of  payment  for  publications,  and  perhaps 
this  subtle  logic  appealed  to  Biddle.  He  might  regard  such 
loans,  even  if  it  could  be  pointed  out  that  they  were  not 
justified  by  business  considerations,  as  justified  by  the  reso- 
lution of  the  bank  to  pay  for  publications.  If  he  had  been 
willing  to  pay  the  Courier  and  Enquirer  several  hundred 
dollars  for  the  publication  of  a  few  columns  in  a  single  issue, 
what  possible  objection  could  there  be  to  a  loan  of  $52,000 
which  would  secure  every  issue  of  the  paper  for  the  bank's 
cause?  As  a  matter  of  economy  the  second  method  might 
even  be  preferable  to  the  first,  since  there  was  a  chance  of 
securing  the  repayment  of  the  capital  with  interest,  besides 
having  the  support  of  the  paper. 

Payments  made  to  printers  by  the  bank  for  publish- 
ing documents,  articles,  and  speeches  favorable  to  re-charter 
were  open  to  the  criticism  of  being  political;  outside  the 
province  of  a  bank ;  made  out  of  the  money  of  the  stock- 
holders, the  largest  of  whom  was  the  government  of  the 
United  States  itself;  and,  finally,  virtual  bribes  to  the  fortu- 
nate printers  and  editors  who  received  the  jobs.  While  the 
directors  felt  justified  in  making  these  expenditures,  yet  all 
these  objections  were  valid,  even  supposing  that  the  prices 
paid  for  the  work  done  were  not  excessive.  Everyone  knows 
that  the  securing  of  printing  which  yields  a  fair  profit  is 
a  matter  of  much  moment  with  publishers,  and  that  those 
who  furnish  such  business  are  naturally  treated  as  patrons. 
In  reference  to  compensation,  the  Senate  committee  of  1834 
declared  that  the  bank  had  given  no  gratuities  to  printers  or 
publishers,  and  left  it  to  the  Senate  to  judge  whether  or 


CHARGES  AGAINST  THE  BANK  265 

not  the  institution  had  allowed  them  "extra  compensa- 
tion." 1  The  evidence  proves  that  the  rate  of  payment  was 
moderate.2 

Another  objection  to  the  expenditure  was  that  the  presi- 
dent of  the  bank  was  permitted  to  dispose  of  the  funds  at 
his  own  discretion.  Jackson  bitterly  complained  of  this  in 
his  paper  of  September  18,  1833,  declaring  on  the  authority 
of  the  government  directors  that  the  sums  spent  by  the 
bank  for  printing  "  during  the  years  1831  and  1832  were 
about  $80, 000." 3  The  directors,  said  Jackson,  put  "the 
funds  of  the  bank  at  the  disposition  of  the  president  for 
the  purpose  of  employing  the  whole  press  of  the  country  in 
the  service  of  the  bank,  to  hire  writers  and  newspapers,  and 
to  pay  out  such  sums  as  he  pleases  to  what  person  and  for 
what  services  he  pleases  without  the  responsibility  of  ren- 
dering any  specific  account." 4  The  criticism  was  just.  The 
expenditures  for  extra  printing  from  1829  to  1834,  inclusive, 
aggregated  $65, 103.25,  and  to  these  were  added  expenditures 
by  President  Biddle,  without  vouchers,  and  without  desig- 
nation of  the  purposes  for  which  they  were  made.  The  total 
of  these  was  $29,605.5  In  whatever  light  the  first  of  these 
items  may  be  viewed,  the  second  was  totally  indefensible. 
The  Senate  committee  of  1834,  though  favorable  to  the 
bank,  condemned  the  practice  and  virtually  censured  the 
directors  for  allowing  the  president  to  exercise  such  powers 
under  the  resolution  of  March  11,  1831.6 

It  is  to  Biddle's  credit  that  he  never  made  any  mystery 
of  his  policy  in  regard  to  paying  for  publications  in  the 

1 8.  D.  17,  23d  Cong.,  2d  Sess.,  p.  39.  2  Ibid.,  pp.  322-9. 

3  Messages  and  Papers  of  the  Presidents,  Vol.  Ill,  p.  14.        *Ibid.,  p.  15. 

6&  D.  17,  23d  Cong.,  2d  Sess.,  p.  329.  See  for  the  bank's  statement  Report  of  the 
Committee  of  Directors  in  1833,  p.  40.  They  admit  the  expenditure  of  $58,265.04  in 
four  years. 

6  Referring  to  the  resolution  they  say :  "  But  expenditures  have  grown  up  under 
it,  resting  on  the  orders  of  the  president,  without  vouchers  or  defined  purpose." 
They  hold  that  "  the  object  of  expenditure  "  should  be  "  set  forth."— Ibid.,  p.  46. 


266  THE  SECOND  BANK  OP  THE  UNITED  STATES 

newspapers,  and  willingly  gave  his  reasons  for  it.  He  believed 
that  most  of  the  opposition  to  the  bank  was  due  to  ignorance, 
and  that  explanatory  articles  would  dispel  this  ignorance 
and  so  put  an  end  to  the  opposition.  Thoroughly  convinced 
that  this  was  true,  he  continued  publishing.1  He  was  assur- 
edly mistaken.  Ingersoll  in  1831  gave  it  as  his  opinion  that 
not  three  members  of  the  Pennsylvania  legislature  had  ever 
"  read  or  will  ever  read  McDuffie's  report,  Gallatin's  article 
or  the  views  in  the  North  American  and  the  National  Ga- 
zette ;"2  while  in  1834  Mathew  Carey  declared  that  the  sys- 
tem of  issuing  pamphlets  dealing  with  abstruse  banking 
questions  at  great  length  was  utterly  mistaken,  that  nobody 
would  read  them,  or,  if  anybody  did,  that  he  would  not  under- 
stand them.8  This  judgment  seems  sound,  as  anyone  will 
agree  who  has  read  the  pamphlets. 

The  amount  of  published  matter  paid  for  by  the  bank 
was  very  great.  It  began  in  April,  1830,  with  Senator 
Smith's  report,  and  continued  for  about  five  years.  The 
bank  not  only  published  articles  itself,  but  distributed  those 
of  others,  and  paid  newspapers  to  publish  reports.  As  a 
consequence,  everyone  who  wrote  on  banking  subjects 
wanted  the  bank  to  pay  for  his  publication.  In  one  case, 
at  least,  a  pamphlet  was  published  without  the  privity  of  the 
bank,  and  then  recompense  was  demanded.  Newspapers,  of 
course,  would  not  print  articles  supporting  the  bank  without 

i "  On  this  whole  theory  of  publication,  my  theory  is  very  simple.  I  believe  that 
nine  tenths  of  the  errors  of  men  arise  from  their  ignorance  —  and  that  the  great 
security  of  all  our  institutions  is  in  the  power,  the  irresistible  power,  of  truth.  I 
recollect  well  when  twenty  years  ago  I  opposed  in  the  Legislature  of  my  state  the 
measures  taken  to  prostrate  the  former  Bank,  how  much  of  the  opposition  to  the  Bank 
was  the  result  of  downright  ignorance  of  its  meaning  and  its  operations —  .... 
I  know  what  was  then  wanting  —  and  I  am  resolved  that  it  shall  not  now  be  wanting. 
I  saw  the  manner  in  which  the  small  demagogues  of  that  day  deceived  the  commu- 
nity —  and  I  mean  to  try  to  prevent  the  small  demagogues  of  this  day  from  repeating 
the  same  delusion." — To  Joseph  Gales,  of  Washington,  March  2, 1831,  P.  L,  B.,  Vol. 
m,  p.  482. 

« Ingersoll  to  Biddle,  March  3, 1831,  B.  P. 

3M.  Carey  to  the  directors  of  the  Bank  of  the  United  States,  Philadelphia, 
March  28, 1834,  ibid. 


CHARGES  AGAINST  THE  BANK  267 

compensation.  A  congressman  rarely  made  a  friendly  speech 
without  expecting  its  dissemination  at  the  expense  of  the 
bank.  The  most  amusing  case  is  that  of  John  Tyler.  Tyler 
was  chairman  of  the  Senate  investigating  committee  of  1834, 
and,  voicing  the  austere  public  morality  characteristic  of 
Virginia  Republicanism  since  the  days  of  Jefferson,  criticised 
the  bank  for  disseminating  pamphlets  and  congressional 
reports.1  "Our  friend,"  wrote  Webster,  "seemed  to  reserve 
all  his  censure  for  these  heads."2  Biddle,  therefore,  felt 
quite  safe  in  asking  Tyler  if  he  wished  his  report  dissemi- 
nated. The  surprise  and  disgust  of  the  bank's  president 
may  easily  be  guessed  when  he  discovered  that  Tyler  did 
wish  it  to  the  extent  of  a  thousand  copies.3  Whatever  credit 
is  due  Tyler  for  his  political  morality,  a  sense  of  humor  was 
evidently  not  his  prominent  characteristics. 

That  the  matter  of  printing  was  carried  entirely  too  far 
will  easily  be  gathered  from  what  has  been  said,  and  even 
the  bank's  most  eager  partisans  were  convinced  that  this 
was  so.  Watmough,  who  arranged  for  much  of  the  printing, 
at  last  protested.  He  thought  they  should  cut  down  the 
number  of  congressional  speeches  published,  though  he 
added,  with  bitter  pleasantry,  "It  is  a  great  assistance  to 
Green,  to  be  sure.  He  is  at  best  however  but  a  mauvais 
sujet,  and  scarcely  worth  what  has  already  been  done  for 
him."  The  printers,  in  his  opinion,  were  "pretty  much  all 
alike  —  let  them  handle  the  money,  au  diable,  the  rest."4 

The  charge  of  jobbing  in  public  stocks  touched  the  honor 
of  the  president  and  corporation,  and,  if  proved,  established 
a  violation  of  the  law ;  for  the  charter  declared  that  the  cor- 

1 8.  D.  17,  23d  Cong.,  2d  Sess.,  p.  45.  2  To  Biddle,  Dec.  17, 1834,  B.  P. 

3 Tyler  "after  blaming  the  Bank  for  circulating  documents  in  its  defence 
instead  of  leaving  to  its  enemies  the  task  of  vindicating  it,  ends  by  making  the 
Bank  incur  an  expense  in  publication  which  it  did  not  desire  and  takes  a  thousand 
copies  of  these  very  '  unpolitic '  publications,  such  being  the  phrase  I  believe  in  his 
report."— Biddle  to  Watmough,  Feb.  9, 1835,  P.  L.  B.,  Vol.  V,  pp.  318,  319. 

«  To  Biddle,  Washington,  Feb.  7, 1834,  B.  P. 


268  THE  SECOND  BANK  or  THE  UNITED  STATES 

poration  should  not  "purchase  any  public  debt  whatsoever,"1 
or  sell  "more  than  $2,000,000  thereof  in  anyone  year."2 
The  specific  charge  was  that  the  bank  jobbed  in  the  3  per 
cent,  stock,  and  that  in  doing  so  it  had  interposed  to  prevent 
the  payment  of  the  national  debt  by  urging  the  govern- 
ment's creditors  not  to  present  the  certificates  of  the  stock 
when  the  day  of  payment  came. 

The  facts  were  as  follows:  On  the  24th  of  March,  1832, 
Asbury  Dickins,  acting  secretary  of  the  treasury,  informed 
Biddle  that  one-half  of  the  3  per  cents.,  amounting  to 
$6,500,000,  would  be  paid  off  by  the  government  on  the  1st 
of  July.3  The  bank  would  have  to  furnish  the  funds  from 
the  government  deposits  held.  Unfortunately,  the  dis- 
charge of  the  debt  in  this  year  had  been  so  enormous,  and 
the  bank's  business  so  expanded,  that  it  was  impossible  to 
raise  the  sum  required  by  the  date  specified.  Biddle,  long 
before  the  notice  from  Dickins,  had  attempted  to  reduce  the 
bank's  business  and  so  get  possession  of  sufficient  specie  to 
meet  the  government's  demands.  He  had  failed  in  this 
attempt.4  He  accordingly  looked  about  him  for  some  other 
means  of  evading  the  threatened  embarrassment,  which 
would  be  fatal  if  it  occurred  in  the  midst  of  the  campaign 
for  a  renewed  charter.  Hurrying  to  Washington,  he  re- 
quested as  a  temporary  relief  a  postponement  of  the  pay- 
ment from  July  1  to  October  1,  and  offered,  on  behalf  of 
the  bank,  to  pay  the  interest  on  the  stock  for  the  three 
months.  His  request  was  granted  on  this  condition.5  Later 
the  treasury  concluded  to  discharge  two-thirds  of  each  cer- 
tificate in  October,  and  the  remainder  of  the  debt  on  January 

1  Sec.  11,  9th  fundamental  article.    See  Appendix  I. 

2  Sees.  5  and  6.    See  Appendix  I. 

3  "  It  is  believed  that  the  means  of  the  Treasury  will  be  sufficient  to  discharge 
one-half  of  the  3  per  cents,  on  the  1st  of  July  next,  and  it  is  proposed  to  give  notice 
accordingly  on  the  1st  of  April."—  H.  B.  460,  22d  Cong.,  1st  Sess.,  p.  531. 

*  See  pp.  146-50. 

5 Testimony  of  Dickins,  H.  R.  121,  22d  Cong.,  2d  Sess.,  pp.  89,  90. 


CHARGES  AGAINST  THE  BANK  269 

1,  1833,1  thus  calling  upon  the  bank  for  a  sum  of  $13,000,- 
000  within  three  months'  time. 

The  bank's  difficulties  under  these  circumstances  are 
vividly  portrayed  in  the  correspondence  with  the  branches, 
and  in  a  letter  of  Biddle's  to  Cadwalader,  outlining  his  plan 
to  secure  the  means  of  payment.  Biddle  thought  that  local 
discounts  must  be  diminished  wherever  possible ;  that  deal- 
ings in  internal  exchange  should  be  materially  reduced ;  that 
as  much  money  as  could  be  spared  should  be  used  to  dis- 
count paper  secured  by  a  deposit  of  3  per  cent,  stock 
and  to  purchase  bills  of  foreign  exchange ;  and  that  negotia- 
tions should  be  begun  with  the  holders  of  the  3  per  cents.2 
Cadwalader  was  doubtful  as  to  the  adequacy  of  this  plan, 
and  it  was  evident  that  the  principal  reliance  must  be  in  a 
negotiation  with  the  holders  of  the  stock,  in  which  the  bank 
would  secure  a  loan  by  paying  the  interest  on  the  stock  in 
the  place  of  the  government,  the  holders  accepting  its 
responsibility  and  thus  relieving  the  government  from  all 
liability.  Any  other  form  of  loan  at  this  time  was  hardly 
feasible,  since  no  one  wished  to  lend. 

The  board  of  directors  had  already  authorized  the  presi- 
dent and  the  exchange  committee  to  defer  "a  part  of  the 
payments."  3  Proceeding  in  accordance  with  this  authority, 
the  following  plan  was  adopted:  The  certificates  of  foreign 

1  Secretary  McLane  to  Biddle,  July  19, 1832,  ibid.,  p.  166. 

2 "  I  would  diminish  wherever  we  can  our  local  discounts ;  I  would  avoid  as 
much  as  possible  purchasing  domestic  bills  any  where  except  on  the  northern  Atlantic 
frontier  and  those  at  very  short  dates,  certainly  within  90  days  —  and  I  would  put 
every  dollar  we  can  spare  in  discounts  on  the  3s  at  5  per  cent,  and  the  purchase  of 
foreign  exchange.  To  those  we  must  [add]  negociations  with  the  large  holders  of 
threes,  especially  the  agents  of  foreigners." — To  Cadwalader,  Washington,  June  30, 
1832,  P.  L.  B.,  Vol.  IV,  p.  255. 

3  "Resolved,  That  the  subject  of  the  communication  just  made  by  the  President, 
be  referred  to  the  committee  of  exchange,  with  authority  to  make,  on  behalf  of  the 
bank,  whatever  arrangements  with  the  holders  of  the  three  per  cent  stock  of  the 
United  States  may,  in  their  opinion,  best  promote  the  convenience  of  the  public  and 
the  interests  of  this  institution." —  Resolution  of  March  13, 1832,  Report  of  the  Bank 
of  the  United  States  to  the  Committee  of  Ways  and  Means,  Jan.  28,  1833,  p.  6.  See 
also  H.  R.  121,  22d  Cong.,  2d  Sess.,  p.  162. 


270  THE  SECOND  BANK  OF  THE  UNITED  STATES 

holders  of  the  stock  were  to  be  surrendered  to  the  bank  and 
by  it  passed  over  to  the  government  as  evidence  of  the  pay- 
ment of  the  debt.  The  bank  itself,  however,  would  not  pay 
the  principal,  but  borrow  it  from  the  original  holders  of  the 
debt,  continuing  the  loan  for  another  year  in  place  of  the 
government  and  paying  the  interest  during  the  continu- 
ance. The  payment  of  $5,000,000  of  the  stock  was  thus 
to  be  deferred.  To  this  plan  there  could  not  be  the  least 
possible  objection,  either  legal  or  moral,  since  the  govern- 
ment would  be  discharged  of  all  obligation,  the  bank  simply 
procuring  a  new  loan  to  the  extent  of  the  $5,000,000  on 
its  own  responsibility.  The  operation  would  be  the  same 
as  if  it  had  paid  the  debt  outright  and  then  immediately 
borrowed  it  back  from  the  original  holders  on  its  own 
account. 

On  the  day  that  the  directors  authorized  the  postpone- 
ment of  the  stock,  Biddle  opened  negotiations  with  T.  W. 
Ludlow,  of  New  York,1  but  soon  perceived  that  there  was 
little  chance  of  getting  the  transaction  settled  in  time  to  be 
of  service.2  He  therefore  dispatched  General  Cadwalader  to 
England  to  make  arrangements  with  the  Barings  to  defer 
the  payment  of  $5,000,000  of  the  stock.3  This  mission  suc- 
ceeded. The  Barings  agreed  to  invite  the  foreign  holders  of 
the  3  per  cents,  to  retain  their  stock  until  October,  1833, 
while  the  Bank  of  the  United  States  was  to  continue  the 
payment  of  the  interest  quarterly  and  to  pay  the  principal 
at  the  date  named.  Since  this  would  probably  not  suffice  to 
defer  $5,000,000,  as  much  of  the  stock  as  possible  was  to  be 
bought  up  by  the  Barings  for  the  bank,  at  the  best  terms, 

1  The  correspondence  is  given  entire  in  H.  R.  121,  22d  Cong.,  2d  Sess.,  pp.  93  ff. 
Biddle  and  Ludlow  had  talked  the  matter  over  before  this. 

2  "But  I  am  afraid  that  it  will  not  before  [i.  e.,  before  Oct.  1]  be  in  my  power  to 
come  to  any  definite  arrangement  with  the  bank  on  the   subject." — Ludlow   to 
Biddle,  July  14, 1832,  ibid.,  p.  95 ;  and  same  to  same,  July  21, 1832,  ibid.,  pp.  96,  97. 

3  Cadwalader  had  been  notified  between  the  1st  and  10th  of  the  month  that  the 
mission  was  to  be  undertaken. — Cadwalader's  testimony,  ibid.,  p.  50. 


CHABGES  AGAINST  THE  BANK  271 

not  over  $91  on  $100.     The  certificates  were  to  remain  with 
the  Barings,  or  with  the  holders  of  them.1 

It  will  be  noticed  that  this  arrangement  differed  consider- 
ably from  the  first  plan  of  the  bank,  inasmuch  as  the  Barings 
were  authorized  to  buy  stock  for  the  bank,  and  also  to  with- 
hold the  certificates,  which  would  leave  the  debt  still  unpaid. 
The  bank  would  be  culpable  in  both  particulars,  for  it  was 
prohibited  by  its  charter  from  purchasing  any  public  debt, 
and  the  arrangement  for  deferring  the  delivery  of  the  cer- 
tificates was  an  unjustifiable  interference  with  the  govern- 
ment's plan  to  discharge  the  debt.  Cadwalader's  agreement 
was,  therefore,  both  morally  wrong  and  illegal.  But  this 
would  not  necessarily  involve  the  bank,  for  the  vital  question 
was:  Had  he  authority  to  make  such  an  agreement?  In 
answer  to  this  question  Cadwalader  distinctly  averred  that 
he  alone  was  responsible,  his  instructions  not  having  con- 
templated the  purchase  of  the  stock.2  In  support  of  his 
admission  are  the  declarations  of  the  directors  that  no  such 
agreement  was  contemplated,  and  Biddle's  disavowal  of  that 
part  of  it  which  was  patently  illegal  on  the  ground  that  the 
institution  was  forbidden  by  its  charter  "  to  purchase  any 
public  debt  whatsoever."5  Unless  there  was  an  infinite 
amount  of  shabby  lying,  and  that,  too,  under  oath,  the  cor- 
poration was  not  guilty.  The  presumption  that  everybody 
lied  will  hardly  be  considered  tenable.* 

1  Circular  of  Aug.  22, 1832,  ibid.,  pp.  101,  102.    An  arrangement  was  also  made 
with  Hope  &  Co.,  of  Amsterdam. — Ibid.,  pp.  103, 104. 

2  "  The  purchase  of  the  stock  by  Messrs.  Baring  had  not  been  adverted  to  in  my 
instructions,  or  in  any  conversation  with  my  constituents  at  home." — Ibid.,  p.  52. 

3  Ibid.,  p.  117. 

4  Suspicious  circumstances  were  that  Cadwalader  had  forwarded  the  substance 
of  the  agreement  with  the  Barings,  stating  that  they  were  to  purchase  for  the  bank 
Aug.  22  (ibid.,  p.  99) ;  that  he  had  forwarded  the  agreement  itself  on  the  25th  (ibid., 
p.  100) ;  but  Biddle  had  not  disavowed  the  illegal  clause  until  Oct.  15,  after  the 
agreement  had  appeared  in  a  New  York  paper  (ibid.,  pp.  87, 117).    Biddle  always 
asserted,  however,  that  he  had  not  received  the  agreement  until  Oct.  12,  and  that 
he  had  straightway  disavowed  it.    (To  John  Sergeant,  Feb.  1, 1833,  P.  L.  B.,  Vol.  IV, 
p.  407;  also  in  all  published  examinations  and  reports  on  the  affair.)    Again,  Cad- 
walader had  had  the  agreement  circulated  in  manuscript,  instead  of  in  print,  in 


272  THE  SECOND  BANK  OP  THE  UNITED  STATES 

The  disavowal  of  Cadwalader's  contract  gave  rise  to  new 
complications.  Biddle  insisted  that  the  certificates  of  the 
stock  must  be  sent  to  the  United  States  in  order  that  he 
might  turn  them  over  to  the  secretary  of  the  treasury.1  The 
Barings  had  already  purchased  $1,428,974.54  and  got 
$2,376,481.45  postponed.  They  now  concluded  to  buy  the 
latter  also  if  the  owners  would  not  consent  to  the  bank's 
revised  terms,2  which  were  to  the  effect  that  new  certificates 
should  be  given  for  the  old  ones  surrendered,  the  bank  to. 
continue  paying  the  interest.3  Many  of  the  foreign  holders 
agreed  to  these  terms,  and  the  Barings  secured  their  certifi- 
cates and  forwarded  them  to  the  United  States.4 

The  affair  made  a  great  noise,  and  kept  the  bank's  advo- 
cates busy  explaining  for  many  months.  Biddle  was  par- 
ticularly sensitive  about  the  charge  of  violating  the  charter. 
That  the  bank  should  encourage  the  holders  of  the  debt  not 
to  present  the  certificates  for  payment,  he  apparently  consid- 
ered of  little  importance  and  of  no  concern  to  anyone  but 
the  bank.  Writing  on  the  subject  he  revealed  the  depth  and 
the  keenness  of  his  feeling: 

With  regard  to  the  return  of  the  certificates  the  Government 
cannot  oblige  any  body  to  present  his  certificate  — •  the  Government 
stops  the  interest  —  but  cannot  compel  a  stockholder  to  take  his  prin- 
cipal  But  supposing  that  the  certificates  are  delayed  for  a 

few  months,  what  harm  does  that  do  to  any  body  ?  The  interest  has 
stopped — the  money  remains  in  the  Treasury;  so  that  instead  of 

order  that  it  might  not  become  public  (H.  R.  121,  22d  Cong.,  2d  Sess.,  p.  100).  The 
bank  ceased  curtailments  Sept.  21,  which  presumably  it  would  not  have  done 
without  knowing  about  the  agreement  (ibid.,  p.  169).  Indeed,  the  letter  of  Aug.  22 
had  reached  Biddle  by  this  time;  Biddle  said  this  was  explicit  enough  to  justify 
the  bank  in  ceasing  curtailment  (to  Sergeant,  loc.  cit.).  But  it  was  also  explicit 
enough  to  justify  a  disavowal  of  the  contract. 

i£T.  R.  121,  22d  Cong.,  2d  Sess.,  p.  118. 

a  To  Biddle,  Nov.  29,  1832,  ibid.,  pp.  112, 113;  and  Biddle  to  Barings,  Oct.  19  and 
31, 1832,  ibid.,  pp.  119, 120. 

3  Ibid.,  pp.  118-20;  circular  of  the  Barings,  p.  112. 

*  Returns  of  stock,  Nov.  29,  p.  Ill ;  Dec.  6,  p.  112;  Dec.  14,  pp.  113-15;  Dec.  19,  pp. 
115, 116 ;  Dec.  22,  p.  116. 


CHABGES  AGAINST  THE  BANK  273 

depriving  the  Government  of  the  use  of  its  funds,  directly  the  reverse 
is  true,  for  the  Government  retains  the  funds  and  pays  no  interest.1 

But  that  the  bank,  the  agent  of  the  government,  should  urge 
the  holders  to  delay  presentation  of  the  certificates,  when 
its  business  was  to  procure  them  for  the  government  at  once, 
was  another  proposition,  and  one  not  to  be  justified  by  such 
arguments.  Moreover,  the  assertions  that  "  the  money  re- 
mains in  the  Treasury,"  "the  Government  retains  the 
funds,"  were  not  strictly  true,  unless  the  bank  and  the 
treasury  were  identical,  for  the  bank  retained  the  funds  and 
the  government  had  no  further  use  of  them. 

Suspicious  souls  will  consequently  continue  to  believe 
that  Biddle's  explanations  were  not  veracious,  but  in  morals 
as  in  law  it  is  well  to  give  the  accused  the  benefit  of  the 
doubt.  The  evidence  of  the  bank's  integrity  was  sufficient 
for  J.  Q.  Adams,  Gulian  C.  Verplanck,  Albert  Gallatin,  and 
Thomas  Cooper,2  and  may  well  be  accepted.  What  is  cer- 
tain is  that  after  Biddle's  disavowal  the  bank  returned  to  its 
legal  position,  if  it  had  ever  deliberately  left  it,  and  the 
postponement  of  the  3  per  cents,  did  not  take  place. 

The  most  serious  charges  from  the  point  of  view  of 
proper  and  safe  business  were  those  which  imputed  usurpa- 
tion of  the  authority  and  power  of  the  board  of  directors,  by 
the  president  and  the  exchange  committee,  and  the  use  of 
such  power  to  loan  funds  to  favored  individuals  on  unusual 
terms. 

The  charge  of  loaning  large  sums  of  money  to  favorites 
was  made  in  the  case  of  T.  Biddle  &  Co.  The  bank  replied 
by  asserting  that  the  firm  acted  as  its  brokers,  which  is 
undoubted,  and  that  the  loans  were  made  to  them  to  loan 

iTo  C.  A.  Wickliffe,  Dec.  6, 1832,  P.L.  B.,  Vol.  IV,  pp.  335,  336. 

2 "To  me,  the  reasoning  of  Verplanck  is  sufficient;  nor  does  the  evidence,  in 
my  view  of  it,  show  any  voluntary  infraction  of  the  charter  by  the  bank  through  the 
agency  of  Gen'l  Cadwalader."— T.  Cooper  to  Biddle  Columbia,  S.  C.,  July  16,  1833, 
B.  P.  Verplanck  nevertheless  condemned  the  arrangement,  and  declared  that  in 
making  it  "the  institution  exceeded  its  legitimate  authority."—  H.  R.  121,  22d  Cong., 
2d  Sess.,  p.  1. 


274  THE  SECOND  BANK  OP  THE  UNITED  STATES 

for  the  bank.1  This  is  likely.  Professor  Sumner's  assertion 
that  precisely  such  loans  led  later  to  the  ruin  of  the  bank 8  is 
not  apropos,  because  the  later  loans  were  made  deliberately 
at  a  moment  when  it  was  intended  to  close  up  the  bank's 
business,  and  were  of  an  entirely  different  nature.8 

The  president  of  a  bank,  if  he  is  a  real  and  active  execu- 
tive, a  man  of  energy,  of  autocratic  temper,  of  tact  and  skill, 
will  always  secure  power  over  his  board,  provided  that  he 
wishes  to  do  so.  In  the  case  of  the  Bank  of  the  United 
States  this  was  rendered  easier  by  the  position  of  the  presi- 
dent. Under  the  by-laws  he  was  ex  officio  a  member  of 
every  committee.*  This  power  in  committee  was  increased 
by  his  right  under  the  rules  of  1833  to  name  them  all  with 
one  exception.5  In  addition  it  must  be  recollected  that  his 
tenure  of  office  was  continuous,  while  that  of  the  directors 
was  intermittent.  Again,  most  of  the  voting  for  directors 
was  done  by  proxy,6  and  out  of  4,533  proxies  in  1832,  Biddle 
in  person  held  1,436,  and  was  joint  holder  in  the  case  of 
1,684  others.7  While  he  thus  held  a  controlling  number  of 
the  votes  of  distant  stockholders,  those  resident  in  Philadel- 
phia rarely  attended  elections,8  and  consequently  the  holders 
of  proxies  had  power  to  elect  the  directors  if  they  chose. 

Nicholas  Biddle  was  a  man  of  intense  energy,  autocratic 
in  temper,  and  possessing  supreme  confidence  in  his  own 
judgment.  It  was  inevitable  that  he  should  rule  and  not 

1  Adams's  report,  H.  B.  460,  22d  Cong.,  1st  Sess.,  p.  390. 

2  Andrew  Jackson  (revised) ,  p.  311.  3  See  p.  365. 

*  Rules  and  Regulations  of  the  Bank  of  the  United  States,  Rule  XVI,  par.  2. 
See  Appendix  III. 

•>  Ibid.,  Rule  XIII,  and  sec.  3,  Rule  XXV.  The  exception  was  the  Committee  on 
the  State  of  the  Bank.  The  rules  in  this  respect  were  effective. —  H.  R.  121, 22d  Cong., 
2d  Sess.,  pp.  53,  54,  56,  65. 

6  H.  R.  460,  22d  Cong.,  1st  Sess.,  p.  284.  ^  Ibid. 

8 "  But  the  stockholders  resident  in  Philadelphia,  ....  will  not  put  themselves 
to  the  inconvenience  of  coming  to  the  Bank  for  the  purpose  of  voting.  The  conse- 
quence is,  that  the  responsibility  of  voting  at  elections  devolves,  in  a  great  degree, 
on  the  representatives  of  the  distant  stockholders." — Biddle,  ibid.,  p.  283. 


CHARGES  AGAINST  THE  BANK  275 

merely  reign,  and  the  proofs  that  he  did  rule  are  observable 
everywhere.  He  appointed  the  committees  of  the  bank  after 
1828,  though  the  rules  giving  him  this  power  were  not 
adopted  until  1833 ;'  he  does  not  want  the  bank's  books 
examined  by  the  government  directors,  and  he  gives  orders 
that  the  books  must  not  be  examined  by  them,2  though  only  the 
board  could  rightfully  do  this ;  he  desires  new  directors  at 
the  central  board  and  writes,  "General  Cadwalader  and  myself 
have  thought  it  was  for  the  interest  of  the  Bank  to  make  the 
change,"  8  though  it  would  be  difficult  to  find  in  the  charter 
any  clause  giving  General  Cadwalader  and  Nicholas  Biddle 
authority  to  appoint  new  directors. 

Though  such  power  might  not  in  itself  be  objectionable, 
it  was  certainly  liable  to  abuse,  and  under  Biddle  something 
like  abuse  can  be  detected.  The  most  serious  charge  was 
that  of  R.  M.  Whitney,  who  asserted  in  1832  that  the  presi- 
dent of  the  bank  (1)  made  discounts  on  his  own  authority ; 

(2)  that  in  doing  so  he  favored  his  relatives,  T.  Biddle  &  Co. ; 

(3)  that  he  made  such  loans  without  charging  interest;  (4) 
that  a  custom  had  obtained  of  permitting  brokers  to  receive 
money  from  the  teller's  drawer  as  temporary  loans,  leaving 
stock  certificates  as  security ;  (5)  that  these  transactions  were 
not  entered  on  the  books  of  the  bank,  and  consequently 
never  came  to  the  knowledge  of  the  directors.     To  substan- 
tiate his  charges,  Whitney  told  a  very  circumstantial  story 
to   the   effect   that   the   cashier  and   assistant   cashier  had 
reported  to  him  specific  transactions  of   this  character  in 
May,   1824;    that  he  with  them  went  to  the  first  teller's 
drawer  and  found  security  for  two  temporary  loans  of  large 
sums ;  that  they  then  went  to  the  discount  clerk's  desk  and 
found  two  notes  for  large  sums  which  had  been  discounted 
by  the  president  alone,  and  not  entered  on  the  books.     He 

1  Memorial  of  the  Government  Directors,  Ex.  Doc.  12,  23d  Cong.,  1st  Sess.,  p.  9. 

2  To  Jaudon,  Newport,  July  16, 1834,  B.  P. 

s  To  D.  Sears,  Jan.  5, 1824,  P.  L.  B.,  Vol.  I,  p.  91. 


276  THE  SECOND  BANK  OF  THE  UNITED  STATES 

said  that  he  instructed  the  officers  "to  enter  on  the  books 
the  money  that  had  been  loaned  from  the  Teller's  Drawer," 
and  that  this  was  done  under  the  head  of  "bills  receivable;" 
that  he  then  went  at  once  to  President  Biddle  and  "desired 
that  nothing  of  a  similar  nature  should  occur  while"  he 
remained  a  director.  The  president  "colored  up  a  good 
deal"  and  said  that  there  should  not.1  Whitney  had  taken 
a  memorandum  of  the  sums  at  the  time  and  produced  it  in 
corroboration  of  his  assertions.2  He  gave  exact  dates  for 
the  transactions. 

Unfortunately  for  him,  his  evidence  broke  down  at  every 
one  of  the  essential  points  most  needing  corroboration.  In 
regard  to  the  charge  that  the  president  made  discounts  on 
his  own  authority,  ex-Cashier  Wilson,  who  was  said  to  have 
given  the  information  and  was  summoned  to  support  Whit- 
ney, swore  positively  that  the  notes  referred  to  had  been  dis- 
counted by  the  board  and  not  by  the  president.3  Both  the 
officers  who,  Whitney  asserted,  had  communicated  to  him  the 
facts  about  the  loan  swore  that  they  had  no  recollection  of 
such  an  interview.4  The  first  teller  and  the  discount  clerk 
declared  that  they  had  no  knowledge  of  the  alleged  visit  to 
their  desks.5  The  officers  also  swore  that  no  single  director 
had  authority  to  order  entries  made  on  the  books,  and  in 
case  such  an  order  was  given  no  clerk  would  obey  it.6  Mr. 
Andrews  furnished  evidence  in  the  books  to  show  that  the 
sum  of  $45,000  was  actually  entered  on  the  day  the  loan 
was  made,  and  consequently  could  not  have  been  ordered 
entered  by  Whitney.7  In  regard  to  the  charge  of  favoritism 
to  the  Biddies,  the  evidence  adduced  was  conclusive  that  the 

i  H.  R.  460,  22d  Cong.,  1st  Sess.,  pp.  115, 118.  2  ibid.,  p.  118. 

3"  With  respect  to  the  note  for  $20,000  for  T.  Biddle,  referred  to  by  Mr.  Whitney, 
I  am  positive  it  was  discounted  by  the  Board.  I  am  equally  positive  as  to  the  note 
of  C.  Biddle.  I  am  as  positive  about  this  as  about  the  other."—  Ibid.,  pp.  114, 126. 

*/6td.,  pp.  112, 119.  5  Ibid.,  pp.  131, 132. 

« Ibid.,  pp.  120, 121, 126, 140.  t  Ibid.,  p.  120. 


CHARGES  AGAINST  THE  BANK  277 

president  had  not  been  guilty.1  That  interest  had  been  paid 
on  all  accommodations  granted  to  the  firm  was  irrefutably 
established  by  the  testimony,  by  the  books  of  the  bank,  and 
by  those  of  the  firm  of  T.  Biddle  &  Co.2  Finally,  to  Whit- 
ney's complete  discomfiture,  it  was  proved  that  President 
Biddle  was  in  Washington  when  the  particular  loans  referred 
to  were  made  in  Philadelphia,  and  so  could  not  have  made 
them,  nor  could  he  have  been  interviewed  then  by  Whitney  in 
regard  to  the  loans.3  The  entire  case  was  so  overwhelmingly 
against  Whitney  that  he  was  compelled  to  admit  that  the 
two  loans  were  not  made  by  the  president;  that  the  inter- 
view with  him  so  confidently  alleged  did  not  take  place  at  the 
time  stated;  that  interest  had  been  paid  on  the  loans;  and 
that  he  was  not  sure  that  he  had  directed  the  entries  to  be 
made.*  The  committee,  though  hostile  to  the  bank,  passed 
a  majority  resolution  declaring  that  in  their  opinion  the 
charges  were  "without  foundation."5 

1  Ibid.,  pp.  112, 114,  Wilson's  testimony ;  p.  129,  Beck's  testimony ;  pp.  135. 136,  T. 
Biddle;  p.  139,  Andrews;  p.  153, Cowperthwaite ;  pp.  154, 155,  Cadwalader ;  pp.155, 156, 
Mcllvaine ;  p.  156,  Eyre. 

2  Ibid.,  pp.  114, 134, 136, 137,  506.  3  Ibid.,  pp.  141  ff. 

*  "The  two  loans  appear  to  have  been  made  and  charged,  while  Mr.  Biddle,  the 
President,  was  absent  at  Washington ;  and  I  think  it  may  be  fairly  inferred  that 
they  were  allowed  by  the  officers,  in  consequence  of  the  precedent  established  of 
similar  loans  having  been  made,  and  they,  not  feeling  willing  to  refuse  to  do,  while 
the  President  was  absent,  what  he  had  authorized  and  done  while  present,  which 
was  the  reason  of  my  being  informed  that  they  had  been  made,  and  that  they  had 
been  put  upon  the  books,  or  that  I  directed  they  should  be.  In  relation  to  interest 
being  paid,  it  certainly  appears  by  the  books  that,  at  the  time  the  two  loans  were 
paid  off,  interest  was  at  the  same  time  paid,  for  the  period  the  money  had  been 
borrowed."— Ibid.,  p.  149. 

$  Ibid.,  p.  433.  In  regard  to  Whitney's  charges  several  facts  deserve  notice.  He 
must  have  been  informed  of  the  loans  to  T.  Biddle,  despite  the  failure  of  the  officers  to 
remember  the  interview ;  otherwise  he  could  not  have  made  his  memorandum,  for 
he  had  no  access  to  the  bank's  books  after  1825.  Wilson  must  have  given  the  infor- 
mation, and  considered  the  act  questionable  (ibid.,  p.  126).  Being  informed  of  these 
loans,  and  consulting  the  books  at  the  time,  and  necessarily  in  company  with  the 
keeper  of  those  books,  Whitney  probably  advised  transferring  the  loans  to  the 
account  of  "  bills  receivable."  This  is  made  more  probable  by  the  fact  that  only  at 
this  time  were  such  loans  charged  to  bills  receivable  (ibid.,  pp.  134,  506).  That 
Whitney  believed  the  matter  worthy  of  reprobation  is  proved  by  his  having  men- 
tioned it  at  the  time  to  a  Mr.  Hunt  (ibid.,  p.  141).  The  fact  that  the  president  was 
absent  when  the  loans  were  made  does  not  prove  that  the  practice  did  not  exist ; 


278  THE  SECOND  BANK  OP  THE  UNITED  STATES 

Yet  before  the  very  committee  which  heard  these  charges 
and  admitted  their  disproof,  it  was  proved  beyond  question 
that  the  president  of  the  bank  had  on  his  own  responsibility 
bought  bills  of  exchange;1  that  he  had  granted  interest  to  T. 
Biddle  &  Co.  on  loans  by  them  to  the  bank,  without  the 
consent  of  anyone  and  against  the  protests  of  the  cashier;2 
that  on  March  23, 1832,  he  had  discounted  a  note  for  $3,500 
for  General  Stevens,  a  congressman  and  a  stranger  to  him, 
without  consulting  either  the  exchange  committee  or  the 
board,3  and  this  in  spite  of  the  fact  that  the  board  met  the 
same  day.4  In  May,  1831,  Biddle  also  granted  a  loan  to  the 
War  Department,  though  he  had  "  had  no  opportunity  of 
consulting  the  Board  of  Directors  on  the  subject." 5 

These  cases  are,  however,  the  only  ones  which  a  thorough 
search  has  revealed.  Nor  would  it  be  rational  to  expect  that 
many  cases  existed,  since  Biddle  was  so  autocratic  that  his 

but  that  someone  besides  the  president  employed  it.  This  someone  was  probably 
the  cashier  himself,  an  assumption  made  almost  a  certainty  by  the  testimony  of  T. 
Biddle,  who  declared  that  he  believed  "  that  the  transaction  was  altogether  with 
Mr.  Wilson"  (ibid., -p.  136).  See  also  p.  135:  "My  transactions  with  the  Bank,  in 
ordinary  cases,  are  done  with  the  Cashiers ;  when  a  rule  is  once  established,  or  in 
usage,  for  1  do  not  know  when  it  becomes  a  rule,  we  apply  to  the  Cashiers ;  and,  in 
nine  cases  out  of  ten,  the  whole  transaction  is  begun  and  concluded  with  them ;" 
and  p.  137,  where  the  entries  in  T.  Biddle's  books  show  that  the  money  came  from 
the  cashier.  The  probability  is  that  Wilson  objected,  not  to  the  practice,  but  to  the 
size  of  these  particular  loans,  although  he  had  made  them  himself.  Troubled  over 
the  matter,  he  then  consulted  Whitney  about  it,  stating  as  a  grievance  that  the 
president  had  distinctly  approved  of  such  extensive  loans.  Whitney  would  then 
advise  their  being  put  on  the  books  instead  of  leaving  only  a  record  of  the  transac- 
tion in  the  teller's  drawer.  At  Biddle's  return  he  probably  argued  against  the  prac- 
tice, and  Biddle  would  agree  that  he  was  right.  This,  it  would  seem,  is  the  only 
possible  explanation  of  the  matter. 

1  Wilson's  testimony.—/?.  R.  460,  22d  Cong.,  1st  Sess.,  p.  112. 

2  "  It  was  not  regarded  by  me  as  a  loan  to  the  Bank  till  the  interest  account  was 
rendered,  and  the  explanation  was  given  by  the  President,  nor  was  it  known  to  the 
Directors." — Idem,  loc.  cit.,  p.  114;  see  also  pp.  128, 135, 436. 

3  "  I  directed  the  discount  on  this  occasion,  without  waiting  for  the  Committee  of 
Exchange,  because,  from  my  own  knowledge  of  the  party,  I  was  sure  it  would  have 
been  done  by  the  committee,  of  which  I  am  myself  a  member,  and  as  the  applicant 
was  about  to  leave  town  I  thought  it  right  to  give  that  reasonable  accommodation 
to  a  stranger."— Biddle,  ibid.,  p.  190;  also  Cowperthwaite's  testimony,  ibid. 

*  Memorial  of  Reuben  M.  Whitney,  pp.  49,  50. 

»  Biddle  to  Secretary  Eaton,  May  7, 1831,  S.  D.  98,  22d  Cong.,  1st  Sess.,  p.  49. 


CHARGES  AGAINST  THE  BANK  279 

will  would  be  pretty  certain  to  obtain  at  the  board.  This 
was  particularly  likely  because  the  directors  rarely  attended 
a  session  of  the  board  in  any  number.  On  one  occasion 
Mcllvaine  writes  Biddle  that  no  quorum  could  be  secured, 
and  on  another  he  says,  "  we  had  the  unusually  large  Board 
of  eight  this  morning."  *  With  a  directorate  so  little  devoted 
to  the  irksome  duties  of  their  positions,  it  was  inevitable 
that  power  should  fall  into  the  hands  of  a  few,  and  it  is  not 
surprising  to  find  an  acquaintance  appealing  to  Biddle  for 
a  loan  on  the  ground  that  "  you  always  get  your  way  with 
the  Board."  2 

Fven  if  Biddle  had  not  controlled  the  board,  still  he 
might  easily  control  the  committee  of  exchange,  which  was 
small  and  appointed  by  himself,  and  over  which  he  presided. 
The  essential  charge  was  that  this  committee  supplanted  the 
board  completely.  That  the  committee  itself  had  no  reason 
for  existing  could  not  be  urged,  since  the  purchase  and  dis- 
counting of  bills  of  exchange  might  frequently  need  to  be 
made  between  discount  days,  and  the  board  met  only  twice 
a  week.  Horace  Binney  consequently  upheld  the  exchange 
committee  as  indispensable  "to  the  due  management  of  the 
parent  bank."  8  The  question  still  remains:  Did  it  act  as  the 
agent  or  the  master  of  the  board? 

The  exchange  department  was  created  early  in  the  history 
of  the  bank,4  and  a  committee  to  manage  the  department 
naturally  followed.5  As  exchange  operations  were  at  first 

i  Aug.  4, 1826,  B.  P.  2  B.  Patterson  to  Biddle,  Sept.  10, 1832,  ibid. 

3  "  Sir,  the  power  exercised  by  the  committee  of  exchange  is  known  by  all  who 
know  anything  of  practical  banking,  as  it  is  now  conducted  in  our  cities,  to  be  not 
only  usual,  but  almost  indispensible ;  and,  to  the  due  management  of  the  parent 
bank,  entirely  so."— C.  Z>.,  Vol.  X,  Part  II,  p.  2355,  Jan.  7, 1834. 

*  July  18, 1817.— Tyler's  report,  8.  D.  17,  23d  Cong.,  2d  Sess.,  p.  3. 

5 "  A  Committee  of  Exchange  consisting  of  three  members  shall  be  appointed 

who  shall  have  special  charge  of  all  matters  relating  to  the  operations  of  the 

Bank  and  its  offices,  in  Foreign  and  Domestic  Exchange  and  Bullion  —  and  who 
shall  act  as  a  daily  committee  for  the  purchase  of  Domestic  Exchange  at  the  Bank." 
—  Rules  and  Regulations  of  the  Bank  of  the  United  States,  Rule  XIII,  par.  2. 
See  Appendix  III. 


280  THE  SECOND  BANK  or  THE  UNITED  STATES 

very  limited,  the  committee  was  of  little  weight;  but  with 
the  stupendous  growth  of  such  dealings  under  Biddle's  sys- 
tem it  became  very  important.1  It  was  now  appointed  quar- 
terly by  the  president,  though  down  to  1828  it  had  been 
selected  by  rotation,  so  that  all  members  might  sit  upon  it.2 
In  the  early  days,  too,  the  functions  of  the  committee  con- 
sisted in  the  management  of  only  exchange  operations, 
while  in  1832  an  officer  of  the  bank  could  say  that  "the 
principal  object  of  having  the  Exchange  Committee "  was 
to  discount  notes  on  days  that  the  board  of  directors  did  not, 
sit.3  At  this  time  the  committee  purchased  "bills  both 
foreign  and  domestic,  and,  in  the  absence  of  the  Board," 
discounted  "domestic  bills  on  any  part  of  the  United 
States.''  *  It  also  discounted  promissory  notes.5  In  brief, 
it  might  "  be  said,  in  some  measure,  to  represent  the  board 
....  to  act  for  the  board  "  6  even  in  the  ordinary  business 
of  the  bank.  In  acting,  however,  it  was  authorized  by  votes 
of  the  directorate,  sometimes  to  perform  specific  duties,  as 
in  the  case  of  the  3  per  cents.,  sometimes  to  operate  gener- 
ally, as  by  the  resolutions  of  the  9th  of  July,  1830,  which 
authorized  the  committee  ' '  to  loan  on  the  collateral  security 
of  approved  public  stock,  large  sums  of  money,  at  a  rate  of 
discount  not  lower  than  five  per  cent."  7  The  government 
directors  in  1833  objected  to  the  making  of  discounts  by  the 

1  From  July  3, 1827.— Tyler's  report,  S.  D.  17,  23d  Cong.,  2d  Sess.,  p.  3. 

2  Report  of  the  government  directors,  April  22, 1833,  Ex.  Doc.  2,  23d  Cong.,  1st 
Sess.,  p.  24. 

3  John  Burtis,  H.  R.  460,  22d  Cong.,  1st  Sess.,  p.  552. 
*M.  L.  Bevan,  H.  R.  121,  22d  Cong.,  2d  Sess.,  p.  73. 

5  Lewis,  8.  D.  17,,  23d  Cong.,  2d  Sess.,  p.  51;  Sullivan,  H.  R.  121,  22d  Cong.,  2d 
Sess.,  p.  65;  Cope,  H.  R.  460,  22d  Cong.,  1st  Sess.,  p.  557;  Bevan,  ibid.,  p.  564. 

6  Cope,  ibid.,  p.  557. 

i  Ibid.,  p.  505,  and  resolution  of  Sept.  17, 1831,  ibid. ;  resolution  of  March  6, 1835, 
NILES,  Vol.  LX,  p.  139.  These  resolutions,  be  it  noted,  gave  the  committee  authority 
to  loan  money  on  stock  security.  In  other  words,  on  July  9, 1830,  it  ceased  to  be  only 
a  committee  of  exchange. 


CHARGES  AGAINST  THE  BANK  281 

committee,  moving  to  restrict  it  to  exchange  purchases;  but, 
nevertheless,  the  board  as  a  whole  approved.1 

Such  authority  and  such  powers  might  not  be  objection- 
able, provided  that  the  board  kept  itself  informed  of  the 
transactions  entered  into  by  the  committee  and  checked 
them  when  necessary.  But  the  discounts  were  not  generally 
"  laid  before  the  directors  for  their  approval  or  rejection," 
but  were  "  acted  upon  definitely  by  the  committee,"  2  the 
directors  not  members  of  the  exchange  committee  mean- 
while knowing  no  "  more  of  the  nature  of  the  operations 
than  other  persons."  3  Such  discounts  were,  however,  entered 
upon  the  books  and  submitted  to  the  board  after  being  made,4 
with  the  exception  of  loans  on  "bills  receivable,"  which 
never  came  before  it  at  all.5  In  1831,  moreover,  the  loans  on 
"  bills  receivable,"  that  is,  loans  secured  by  stock,6  began  to 
increase  notably.7  This  was  ominous,  when  it  is  recollected 
that  Biddle  early  in  his  administration  had  condemned  such 
loans  as  bad  banking.8  But  in  all  this  the  committee  acted 
under  the  board's  authority. 

A  committee  of  five,  including  the  president  and  cashier 
—  a  committee  "  expressly  invested  with  an  authority  which, 
from  its  very  nature,  exempted"  it  "from  many  of  the  ordi- 
nary rules  of  discounting," 9  which  discounted  promissory 

1  Ex.  Doc.  2,  23d  Cong.,  1st  Sess.,  pp.  23-5;  and  Ex.  Doc.  12,  23d  Cong.,  1st  Sess., 
PP,  8,  9. 

2  Biddle,  H.  R.  460,  22d  Cong.,  1st  Sess.,  p.  84. 

3  R.  Willing,  H.  R.  121,  22d  Cong.,  2d  Sess.,  p.  69.  <  Sullivan,  ibid.,  p.  62. 

5  Report  of  the  Investigating  Committee  of  Stockholders,  April  3, 1841,  NILES, 
Vol.  LX,  p.  107. 

6" 'Bills  receivable'  are  those  secured  by  stock,  and  on  which  the  full  amount 
is  advanced  to  the  borrower  with  interest,  payable  when  the  loan  is  due.  To  this 
account  is  also  carried  bills  growing  out  of  compromises  of  debts,  and  more  recently, 
of  bills  received  on  account  of  India  arrangements."— if.  R.  460,  22d  Cong.,  1st  Sess.,. 
p.  120. 

7  For  1822-30,  $1,059,202.90;  for  1831,  $1,121,107.51.— Ibid.,  pp.  506,  507. 

8  Biddle  to  Isaac  Lawrence,  Oct.  13, 1823.— P.  L.  B.,  Vol.  I,  p.  55. 

« Biddle,  H.  R.  460,  22d  Cong.,  1st  Sess.,  p.  542.  Bevan  said  that  it  was  bound 
by  no  rules  "other  than  those  which  men,  feeling  an  interest  in  the  bank  and  in  the 
public  good,  would  be  governed  by."— H.  R.  121,  22d  Cong.,  2d  Sess.,  p.  74. 


282  THE  SECOND  BANK  OP  THE  UNITED  STATES 

notes  four  days  out  of  every  week  and  controlled  the  enor- 
mous exchange  operations  of  the  bank,  was  likely  to  absorb 
power,  likely  to  abuse  its  authority.  There  can,  indeed,  be 
no  doubt  that  this  was  the  result.  After  the  downfall  of  the 
bank,  certain  of  the  directors  accused  Biddle  of  having 
destroyed  the  institution,  the  specific  charges  being  that  a 
resolution  of  March  6, 1835,  gave  the  complete  control  of  the 
bank  into  the  hands  of  the  president  and  the  exchange  com- 
mittee, that  this  committee  exercised  its  authority  to  loan 
money  on  the  pledge  of  the  stock  of  incorporated  companies, 
no  matter  what  the  companies  were  like  or  what  their 
operations  were,  and  that  these  loans  ruined  the  bank.1 
Biddle's  accusers,  however,  omitted  the  extremely  important 
qualification  that  such  powers  had  been  primarily  granted  to 
the  committee  five  years  earlier,  and  Biddle  answered  their 
charge  that  the  committee  dealt  in  regular  discounts  by 
proving  that  this  had  long  been  the  custom,  and  had  been 
authorized  by  the  board,2  as  is  apparent  enough  from  what 
has  already  been  said.  This,  however,  was  only  to  push 
back  the  charges  to  a  date  five  years  earlier.  The  directors 
had  no  answer,  because  Biddle's  rejoinder  proved  that  they 
were  equally  guilty,  having  been  members  of  the  board  at 
the  time,  and  having  voted  for  the  obnoxious  resolutions, 
besides  declaring  as  members  of  examining  committees  that 
the  business  was  sound.3  They  had  partly  forestalled  this 
answer,  however,  by  declaring  that  the  committee  on  the 
state  of  the  bank  never  really  investigated  its  affairs,  but 

i This  resolution  gave  the  president  and  exchange  committee  power  "to  make 
loans  on  the  security  of  the  stock  of  this  bank,  or  other  approved  security,  and  if 
necessary,  at  a  lower  rate  than  six,  bnt  not  less  than  five  per  cent  per  annum." — 
— Report  of  the  Investigating  Committee  of  Stockholders,  April  3,  1841,  NILES,  Vol. 
LX,  p.  106. 

2  Biddle  to  John  M.  Clayton,  April  14, 1841,  ibid.,  p.  138. 

3  Idem,    Votes  on  the  proposition  to  reduce  the  powers  of  the  exchange  commit- 
tee, Eyre  and  Lippincott  always  in  the  negative,  April  19, 1833 ;  May  2,  1833.    Com- 
mittees on  state  of  the  bank,  including  Lippincott  on  four  of  them,  from  1836-38.— 
Ibid.,  p.  139. 


CHARGES  AGAINST  THE  BANK  283 

accepted  statements  made  by  the  president,  while  many  of 
the  transactions  were  concealed  under  the  item  of  "bills 
receivable." 1  The  conclusion  is  irresistible  that  abuses  did 
exist,  and  were  participated  in  by  both  accused  and  accusers. 
Biddle  could  not  controvert  the  charge ;  the  directors  could 
not  carry  it  to  its  logical  conclusion  because  it  inculpated 
them.2 

That  abuses  existed  after  1830  must  be  admitted,  and  this 
is  the  principal  point.  But  admitting  this — admitting  that 
the  president  and  the  exchange  committee  controlled  the 
business  of  the  bank,  in  regard  to  dealings  in  foreign  and 
domestic  exchange,  to  loans  on  stock,  and  to  discounting 
between  discount  days,  while  the  president  even  made  dis- 
counts absolutely  on  his  own  authority  —  admitting  all  this, 
yet  it  does  not  follow  that  they  were  to  be  held  responsible 
for  the  losses  accruing.  The  board  gave  this  authority  in 
many  cases,  and,  where  it  did  not,  it  might  have  checked  the 
practice,  for  the  dealings  of  the  exchange  committee  were 
placed  sooner  or  later  before  the  entire  board,  and  the  trans- 

i "  The  mode  in  which  the  committee  of  exchange  transacted  their  business,  shows 
that  there  really  existed  no  check  whatever  upon  the  officers,  and  that  the  funds  of 

the  bank  were  almost  entirely  at  their  disposition They  exercised  the  power 

of  making  loans  and  settlements,  to  full  as  great  an  extent  as  the  board  itself 

The  established  course  of  business  seems  to  have  been,  for  the  first  teller  to  pay  on 
presentation  at  the  counter,  all  checks,  notes,  or  due  bills  having  indorsed  the  order 
or  the  initials  of  one  of  the  cashiers,  and  to  place  these  as  vouchers  in  his  drawer, 
for  so  much  cash,  where  they  remained  until  just  before  the  regular  periodical 
counting  of  the  cash,  by  the  standing  committee  of  the  board  on  the  state  of  the 
bank.  These  vouchers  were  then  taken  out,  and  entered  as  '  bills  receivable,'  in  a 

small  memorandum  book,  under  the  charge  of  one  of  the  clerks It  can  be  said, 

....  with  entire  certainty,  that  the  very  large  business  transacted  in  this  way,  does 
not  appear  upon  the  face  of  the  discount  books,  was  never  submitted  to  the  exami- 
nation of  the  members  of  the  board,  at  its  regular  meetings,  nor  is  it  anywhere 
entered  on  the  minutes,  as  having  been  reported  to  that  body,  for  their  information 
or  approbation." —  Report  of  the  Investigating  Committee  of  Stockholders,  April  3, 
1841,  NILES,  Vol.  LX,  p.  107.  See,  in  answer,  Biddle  to  Clayton,  April  14, 1841,  ibid., 
p.  139,  and  in  rebuttal  of  this  the  second  report  of  the  Investigating  Committee,  May 
18, 1841,  ibid.,  p.  203. 

2 The  directors  finished  by  saying  that  the  "board  of  directors  and  its  standing 
committees  had  become"  a  mere  form.  This  was  their  thesis.—  Ibid.,  p.  203.  The 
board  being  a  mere  form,  the  conclusion  was  that  the  president  and  the  committee 
had  usurped  its  functions. 


284  THE  SECOND  BANK  OP  THE  UNITED  STATES 

actions  might  be  known  at  any  time.1  All  the  business  of 
the  bank  was  to  be  investigated  by  a  committee  appointed  by 
the  directors  four  times  a  year,2  and  if  this  committee  was 
efficient,  all  errors  and  all  transactions  should  have  been 
known  to  it,  and  through  it  to  the  board.  If,  therefore,  bad 
business  was  done,  the  board,  and  not  the  president  or  the 
exchange  committee,  was  responsible.  The  censure  must 
lie  here,  and  it  must  be  heavy,  for  of  all  the  charges  exam- 
ined this  is  the  only  one  thoroughly  substantiated,  and  the 
only  one  of  great  and  perilous  import. 

1  "They  report,  on  the  books,  all  their  doings  daily.    The  aggregate  of  foreign 
bills  are  entered  in  the  general  account  of  the  bank,  which  is  always  open  to  the 
inspection  of  every  director,  so  that  the  board  can  see  at  any  time  what  the  execu- 
tive committee  are  doing,  by  an  examination  of  the  debit  and  credit  on  the  books. 
....  The  domestic  bills  are  entered  daily  in  detail  —  the  drawer,  indorser,  and 
payer,  the  amount,  when  and  where  due,  are  all  entered,  with  the  discount  and  all 
particulars."— Bevan,  Feb.  14, 1833,  H.  R.  121,  22d  Cong.,  2d  Sess.,  pp.  73,  74. 

2  Rules  and  Regulations  of  the  Bank  of  the  United  States,  Rule  XIII,  par.  3. 
See  Appendix  III. 


CHAPTER   XII 

THE  WAR  ON  THE  BANK 

IN  July,  1832,  Biddle  announced  to  supporters  of  the 
bank  that  it  would  take  no  active  part  in  the  campaign,  since 
such  action  was  contrary  to  its  principles.1  It  aided,  how- 
ever, by  the  dissemination  of  publications  in  its  favor.  Mean- 
while it  devoted  its  energies  to  its  own  affairs,  though  not 
yet  determined  upon  its  final  policy,  which  could  not  be 
settled  until  the  issue  of  the  campaign  was  known.2  If  the 
two-thirds  majority  was  secured,  it  would  continue  as  before ; 
if  it  was  not  secured,  then  a  change  in  policy  might  be 
adopted.  When  at  last  it  was  known  that  Jackson  had 
been  triumphantly  re-elected,  the  directory  concluded,  never- 
theless, that  no  "  change  in  the  general  system  of  operations" 
should  take  place.  The  bank  would  not  "  commence  any 
systematic  reduction  of  its  loans  with  a  view  to  winding  up 
its  affairs."  The  only  change  contemplated  was  "  to  give 
gently  and  gradually  the  loans  of  the  Bank  the  direction  of 
domestic  bills,  ....  which  being  payable  at  maturity" 
would  "give  the  Institution  a  greater  command  over  its 
funds."  But  there  was  no  intention  of  beginning  "to  close 
its  concerns."3  Evidently  the  directors  still  hoped  that  a 
new  charter  might  be  secured. 

Their  chances,  however,  had  materially  diminished.  A 
necessary  consequence  of  the  struggle  had  been  to  embitter 
both  parties  and  to  increase  the  suspicion  of  base  motives 
on  both  sides.  The  Globe  did  not  hesitate  to  assert  "  that 
members  of  the  defeated  party  were  prompting  the  '  minions 

1  See  p.  251. 

2  Biddle  to  various  directors,  Nov.,  1832,  P.  L.  B.,  Vol.  IV,  pp.  311-15. 

3  Biddle  to  John  Rathbone,  of  New  York,  Nov.  21, 1832,  ibid.,  p.  332. 

285 


286  THE  SECOND  BANK  OP  THE  UNITED  STATES 

of  the  bank '  "  to  assassinate  the  president,1  and  the  tone  of 
the  party  newspapers  became  absolutely  ferocious.  Jackson 
shared  in  this  spirit  and  was  not  content  to  rest  satisfied 
with  his  signal  victory.  He  longed,  he  said,  "  for  retirement, 
and  repose  on  the  Hermitage.  But  until  I  can  strangle  this 
hydra  of  corruption,  the  Bank,  I  will  not  shrink  from  my 
duty,  or  my  part."2  Having  once  entered  the  fray,  he  would 
be  appeased  with  nothing  less  than  the  total  annihilation  of 
the  bank,  thoroughly  convinced  that  the  monster  was  uncon- 
stitutional, undemocratic,  corrupt,  subversive  of  liberty, 
dangerous  to  "the  people." 

In  the  message  of  1832  he  complained  at  length  of  the 
bank's  behavior  and  recommended  the  sale  of  the  govern- 
ment stock  therein  and  an  investigation  by  Congress  to 
determine  whether  it  was  safe  to  leave  the  public  funds  in 
its  control.3  Biddle  was  well  aware  of  the  president's  feel- 
ing and  for  the  first  time  was  not  surprised  by  the  contents 
of  the  message.4  He  indeed  suspected  that  the  executive 
would  attempt  the  discredit  of  the  bank  by  planning  a  run 
upon  the  Washington  office.  "I  have  to-night  directed  a 
reinforcement  of  specie  to  Washington  to  protect  the  Branch 
against  the  Officers  of  the  Executive.  Is  not  that  a  mon- 
strous state  of  affairs  ?  " 5  What  hurt  and  angered  him  still 
more  was  that  McLane  had  supported  his  chief's  insinua- 
tions of  the  bank's  insolvency,  declaring  that  its  action  in 
relation  to  the  3  per  cents,  and  other  matters  had  "tended 
to  disturb  the  public  confidence  in  the  management  of  the 
institution,  "  and  had  suggested  "  an  inquiry  into  the  security 
of  the  bank  as  the  depository  of  the  public  funds."6  The 

1  PAETON,  VoL  III,  p.  431. 

2  Jackson  to  Rev.  H.  M.  Cryer,  Washington,  April  7,  1833,  The  American  His- 
torical Magazine,  Vol.  IV,  p.  239. 

3  Messages  and  Papers,  Vol.  II,  pp.  599,  600,  Dec.  4, 1832. 

*"I  have  known  for  some  time  that  the  message  would  contain  just  such  a 
notice  of  the  Bank."— Biddle  to  Watmough,  Dec.  6, 1832,  P.  L.  B.,  Vol.  IV,  p.  335. 

5 Ibid.  6  Ex.  Doc.  3, 22d  Cong.,  2d  Sess.,  p.  14. 


THE  WAR  ON  THE  BANK  287 

message  and  report  shook  the  credit  which  is  the  very  life  of 
such  an  institution  and  depressed  the  price  of  the  stock.1 
The  bank  might  be  broken  as  a  consequence  of  the  loss  of 
confidence  in  its  solvency,  and  Biddle  bitterly  denounced 
master  and  man  as  deserving  impeachment.2 

The  president,  however,  had  no  reason  to  dread  impeach- 
ment, but  pressed  constantly  forward.  He  was  determined 
to  deprive  the  bank  of  the  deposits,  basing  his  determination 
upon  two  opinions :  first,  that  they  were  not  safe  in  the  bank ; 
and  secondly,  that  if  they  were  allowed  to  remain  in  its 
custody,  they  would  be  employed  to  bribe  the  members  of 
Congress  to  pass  a  re-charter  over  the  veto.  To  a  friend  he 
wrote: 

This  combination  [of  Clay  and  Calhoun]  wields  the  U.  States 
Bank,  &  with  its  corrupting  influence  they  calculate  to  carry  every 
thing,  even  its  recharter  by  two  thirds  of  Congress,  against  the  veto 
of  the  Executive,  if  they  can  do  this,  they  calculate  with  certainty 
to  put  Clay  or  Calhoun  in  the  Presidency — and  I  have  no  hesitation 
to  say,  if  they  can  recharter  the  bank,  with  this  hydra  of  corruption 
they  will  rule  the  nation,  and  its  charter  will  be  perpetual,  and  its 
corrupting  influence  destroy  the  liberty  of  our  country.  When  I 
came  into  the  administration  it  was  said,  &  believed,  that  I  had  a 
majority  of  seventy-five  —  since  then,  it  is  now  believed  it  has  bought 
over  by  loans,  discounts,  &c.,  &c.,  until  at  the  close  of  last  session, 
it  was  said,  there  was  two  thirds  for  rechartering  it.3 

In  this  opinion  he  was  most  obstinately  fixed,  Blair,  of 
the  Globe,  pressing  it  upon  him  constantly.4  He  was, 

1  The  War  on  the  Bank  of  the  United  States,  p.  25.   Stock  fell  4  per  cent.— NILES 
Vol.  XLIII,  p.  240. 

2  "But  when  I  think  of  the  conduct  of  the  President  and  the  Secretary  in  thus 
endeavoring  to  prostrate  the  credit  of  the  Bank  and  the  country  both  here  and  in 
Europe,  I  come  to  the  conclusion  that  they  both  deserve  impeachment." — To  Wat- 
mough,  Jan.  13, 1833,  P.  L.  B.,  Vol.  IV,  p.  381. 

3  Jackson  to  Rev.  H.  M.  Cryer,  Washington,  April  7,  1833,  American  Histori- 
cal Magazine,  Vol.  IV,  p.  239. 

*  "  If  the  bank  is  permitted  to  have  the  public  money,  there  is  no  power  that  can 
prevent  it  from  obtaining  a  charter  —  it  will  have  it  if  it  has  to  buy  up  all  Congress, 
and  the  public  funds  will  enable  it  to  do  so."— Jackson  to  W.  B.  Lewis,  Lewis's 
narrative,  PAETON  Vol.  Ill,  p.  506.  See  for  Blair's  opinion  ibid.,  pp.  503-5. 


288  THE  SECOND  BANK  or  THE  UNITED  STATES 

moreover,  informed  by  James  A.  Hamilton  that  "a  gen- 
tleman whose  knowledge  of  the  views  of  the  United 
States  Bank  is  only  second  to  that  of  its  President"  had 
told  him  that  the  bank  counted  upon  securing  a  re-charter 
in  spite  of  the  president.1  Even  if  it  did  not  succeed  now, 
he  believed  that  it  would  attain  its  purpose  after  his  retire- 
ment, and  consequently  it  was  necessary  to  precipitate  another 
conflict  and  thus  force  the  bank's  hand.2  The  idea  of  with- 
holding the  deposits  was  not  a  new  one.  Secretary  Ingham 
in  his  acrid  correspondence  with  Biddle  in  1829  had  pointed 
out  such  a  possibility,3  and  it  had  been  suggested  during  the 
investigation  of  1819.*  Moreover,  attempts  at  a  partial 
withdrawal  of  the  deposits  had  been  made  several  times, 
though  without  success.5  The  authority  to  remove  the  pub- 
lic funds  from  the  bank  had  been  confided  by  the  charter  to 
the  secretary  of  the  treasury,  to  be  exercised  at  his  discre- 
tion. He  must,  however,  give  his  reasons  for  the  act  to 
Congress  as  soon  as  possible  after  the  removal.6 

The  advisability  of  depriving  the  bank  of  the  public 
deposits  was  apparently  discussed  by  the  president's  inti- 
mates during  the  campaign  of  1832,  for  the  bank  was  warned 
of  the  likelihood  of  such  action  in  August  of  that  year.7  After 
the  campaign,  rumors  of  the  president's  resolution  came  thick 
and  fast,  and  Biddle  was  informed  "  that  the  determination 
to  take  the  deposits  away  is  final."*  Other  correspondents 

1  Feb.  28, 1833,  Reminiscences,  p.  251. 

2  Extra  Globe,  Vol.  I,  p.  27,  July  3, 18J4.    Taney's  speech,  Aug.  6, 1834,  ibid.,  p.  146. 

3  "  I  take  the  occasion  to  say,  if  it  should  ever  appear  to  the  satisfaction  of  th« 
Secretary  of  the  Treasury  that  the  bank  used  its  pecuniary  power  for  purposes  of 
injustice  and  oppression,  he  would  be  faithless  to  his  trust  if  he  hesitated  to  lessen 
its  capacity  for  such  injury,  by  withdrawing  from  its  vaults  the  public  deposites." — 
To  Biddle,  Oct.  5, 1829,  H.  R.  460,  22d  Cong.,  1st  Sess.,  p.  460. 

*  Spencer's  resolution,  Feb.  1,  1819,  A.  of  C.,  15th  Cong.,  2d  Sess.,  Vol.  Ill,  pp. 
922,923. 

5  See  pp.  177,  202.  6  Sec.  15  of  the  charter.  Appendix  I. 

i "  He  may  take  the  responsibility  —  and  [I]  think  it  well  to  be  prepared  for  that 
•vent."— Senator  J.  S.Johnston  to  Biddle,  Aug.  2, 1832,  B.  P. 
8 K.  L.  Colt;  Cowperthwaite  to  Biddle,  Dec.  7, 1832,  ibid. 


THE  WAR  ON  THE  BANK  289 

gave  the  same  assurance  in  January,  1833.  He  was  also 
informed  that  there  was  a  project  to  create  another  bank  to 
take  the  place  of  that  already  existing.1  A  third  plan  was 
for  the  president  of  the  United  States  to  issue  "  a  scire  facias 
to  ascertain  if  the  charter  had  not  been  forfeited."2 

While  these  projects  were  being  discussed  the  adminis- 
tration had  taken  hostile  measures  against  the  bank.  Mc- 
Lane,  during  the  interval  between  the  sessions,  had  appointed 
an  agent,  a  Jackson  partisan,  formerly  a  director  of  the  bank 
and  engaged  in  western  business,  to  examine  into  its  affairs, 
especially  into  the  condition  of  the  western  debts.  To  the  dis- 
comfiture of  its  enemies,  his  report  declared  that  these  debts 
in  his  opinion  were  safe  and  that  the  deposits  might  with 
confidence  be  allowed  to  remain  in  the  custody  of  the  corpo- 
ration.3 The  report  was  strengthened  through  the  rejection 
by  the  House  in  February,  1833,  of  a  motion  to  sell  the 
government  stock,*  by  a  report  of  the  Committee  of  Ways 
and  Means  to  the  same  effect,5  and  still  more  by  the  emphatic 
declaration  of  the  representatives,  by  a  vote  of  109  to  46, 
that  in  their  opinion  the  deposits  were  perfectly  safe  in  the 
keeping  of  the  bank.6 

Though  these  acts  certainly  staggered  Jackson's  sup- 
porters, they  did  not  affect  his  purpose  in  the  least.  On  the 
contrary,  he  was  all  the  more  convinced  that  it  was  necessary 
to  act  in  order  to  hinder  the  bank's  securing  a  re-charter  by 
bribery.  The  effect  upon  Biddle  and  his  friends  was  cheer- 
ing. The  hope  of  securing  a  new  charter  had  not  perished. 
In  January  Jaudon  opposed  the  sale  of  the  government's 
stock  in  the  bank  because  "it  would  weaken  our  chance  of 

1  Ingersoll  to  Biddle,  Jan.  18, 1833,  ibid. 

2  Biddle  to  J.  G.  Watmough,  Feb.  19, 1833,  P.  L.  B.,  Vol.  IV,  p.  440. 
SToland's  report,  Dec.  4,  1832,  Ex.  Doc.  8,  22d  Cong.,  2d  Sess.,  p.  3. 
*  C.  D.,  Vol.  IX,  Part  II,  pp.  1707, 1722.    Vote,  102  to  91. 

5H.  R.  121,  22d  Cong.,  2d  Sess.,  p.  5,  March  2, 1833. 
«  C.  D.,  Vol.  IX,  Part  II,  p.  1936,  March  2, 1833. 


290  THE  SECOND  BANK  OP  THE  UNITED  STATES 

a  re-charter." l  On  the  day  that  the  House  declared  its  be- 
lief in  the  safety  of  the  deposits  in  the  bank's  custody,  Ser- 
geant said  that  he  thought  there  was  reason  to  hope  for  a 
new  charter,2  while  Clay  informed  Biddle  that  the  pros- 
pects were  not  bad,  though  nothing  could  be  done  for  the 
present.3  He  hoped  "  that  at  the  next  session  or  the  session 
after,  the  charter"  would  be  renewed,*  while  Biddle  expressed 
his  conviction  "  that  the  chances  of  a  renewal  have  increased 
and  are  increasing." !  Jackson's  conflict  with  the  Nullifiers 
encouraged  Biddle  to  believe  that  support  could  be  secured  in 
the  South,  while  the  momentary  affiliation  of  Webster  and 
Jackson  against  the  Nullifiers  gave  hopes  of  influencing  the 
president  through  the  bank's  great  champion.  The  first  ex- 
pectation was  justified ; 6  the  second  was  not.  In  April  Biddle 
wrote  to  Webster  asking  him  to  attempt  a  reconciliation  with 
the  administration,  saying  that  "whatever  is  done  in  the  way 
of  pacification  should  be  done  soon,  for  if  the  deposits  are 
withdrawn,  it  will  be  a  declaration  of  war  which  cannot  be 
recalled  ;" 7  "the  whole  question  of  peace  or  war  lies  in  the 
matter  of  the  deposites."8  Webster  did  what  he  could,  but 
without  avail. 

Before  acting  Jackson  took  advice   as  to  the  probable 

1  Jaudon  to  Biddle,  Washington,  Jan.  23, 1833,  B.  P.    Also  Biddle  to  Watmough, 
Feb.  13, 1833,  P.  L.  B.,  Vol.  IV,  p.  432. 

2  To  Biddle,  March  2, 1833,  B.  P. 

3  To  Biddle,  Feb.  16, 1833,  B.  P.  *To  Biddle,  March  4,  ibid. 

5  To  William  B.  Shepard,  of  Elizabeth  City,  N.  C.,  March  16, 1833,  P.  L.  B.,  Vol. 
IV,  pp.  459,  460. 

6  Cooper,  of  South  Carolina,  who  had  written  against  the  bank,  now  came  out 
in  its  favor.— Cooper  to  Biddle,  Columbia,  S.  C.,  April  27, 1833,  B.  P.    Cooper  and 
Leigh,  of  Virginia,  took  the  ground  that  the  issue  was  between  the  old  bank  or  a 
new  one  after  Jackson's  pattern.    Biddle  constantly  assured  the  southerners  that 
such  was  the  case.— To  Cooper  and  to  J.  S.  Barbour,  July  11, 1833,  P.  L.  B.,  Vol.  IV, 
p.  513. 

7  Biddle  to  Webster,  April  8, 1833,  B.  P. 

8"!  wrote  to  you  to  say  that  Mr.  L.  [Livingston?]  would  be  in  New  York.  I 
write  to  you  again  to  say  that  I  think  it  would  be  well  to  see  him.  The  whole  ques- 
tion of  peace  or  war  lies  in  the  matter  of  the  deposites.  If  they  are  withdrawn,  it  is 
a  declaration  of  war.  It  is  wiser  therefore  to  begin  the  work  of  peace  before  any 
irrevocable  step  is  taken."— Biddle  to  Webster,  April  10, 1833,  ibid. 


THE  WAB  ON  THE  BANK  291 

effect  of  a  removal  of  the  deposits.  James  A.  Hamilton 
convoked  a  meeting  of  bankers  in  New  York  city  and  ob- 
tained their  opinion.  It  was  decidedly  averse.  Mr.  Gal- 
latin  was  most  determined  in  opposition.1  Isaac  Bronson 
answered  a  number  of  queries  at  length.  He  said  that  the 
bank  would  not  be  placed  in  the  power  of  the  state  banks 
by  the  removal  of  the  deposits;  that  it  would  be  compelled 
to  "  reduce  its  discounts  by  an  amount  equal  to  the  average 
sum  of  public  deposits  withdrawn  from  it,"  since  it  could 
not  otherwise  pay  them  without  reducing  its  specie,  which  it 
"could  not  do  safely;"  that  if  it  reduced,  the  state  banks 
would  have  to  do  likewise ;  that  a  contest  between  the  bank 
and  the  state  banks  would  necessarily  result;  that  no  com- 
bination of  state  banks  could  be  formed  to  take  its  place ;  and 
that  the  withdrawal  of  the  deposits  would  probably  aid  in 
securing  a  re-charter.2  With  these  assurances  to  guide  him, 
Jackson  persisted  in  his  course,  and  knowing  that  a  panic 
must  in  all  probability  result,  according  to  the  opinion  of  a 
competent  banker  who  was  a  friend  to  him  and  an  enemy  to 
the  bank,  he  must  be  held  accountable,  as  the  supporters  of 
the  bank  asserted,  for  having  precipitated  the  panic.3  Be- 
sides securing  these  opinions,  the  president  on  April  14,  and 
again  on  August  3,  instructed  the  government  directors  to 
make  an  examination  into  the  situation  and  conduct  of  the 
bank.*  In  their  reports  to  him  they  detailed  a  number  of 
acts  which  he  considered  conclusive  proof  of  the  corrupt  in- 
terference of  the  corporation  in  politics  and  its  settled  hostil- 
ity to  the  government.5 

i  Reminiscences,  p.  253.  « Ibid.,  pp.  253-8,  April  4, 1833. 

3  Moreover,  that  the  administration  believed  that  the  bank  would  be  compelled 
by  its  measures  to  contract  is  inferable  from  Kendall's  correspondence :  "  If  it  be 
determined  not  to  remove  them,"  he  wrote  to  Secretary  Duane,  *'  it  is  supposed  the 
Bank  of  the  United  States  will  resume  its  wonted  course,  and  cease  to  distress  the 
community."— Sept.  4, 1833,  S.  D.  17,  23d  Cong.,  1st  Sess.,  p.  16. 

*  Jackson  to  the  directors,  April  14  and  Aug.  3, 1833,  Ex.  Doc.  12,  23d  Cong.,  1st 
Sess.,  pp.  27,  33. 

5  Paper  of  Sept.  18, 1833,  Messages  and  Papers,  Vol.  Ill,  pp.  13-16. 


292  THE  SECOND  BANK  OP  THE  UNITED  STATES 

Meanwhile,  warnings  that  the  deposits  would  be  removed 
in  spite  of  the  action  of  Congress  continued  to  reach  the 
bank's  president.  Yet,  at  the  same  time,  he  was  informed 
that  "  the  question  ....  about  removing  the  deposits  is  as 
far  from  being  settled  as  ever"  and  that  the  leading  members 
of  the  cabinet  were  unalterably  opposed  to  the  policy.1  His 
own  opinion  was  that  the  administration  "  would  not  dare  to 
remove  them." 2  On  the  15th  of  April  he  was  informed  that 
changes  would  be  made  in  the  cabinet;  that  McLane  would 
be  secretary  of  state,  a  Pennsylvanian  secretary  of  the  treas- 
ury, and  that  "the  deposits  will  not  be  removed"  McLane 
having  "  taken  a  decided  stand  "  and  won  the  day.3 

This  information  was  partially  correct.  The  changes  in 
the  cabinet  were  made  in  accordance  with  it,  but  they  were 
made  with  the  expectation  of  securing  a  more  pliable  secre- 
tary of  the  treasury  than  McLane.  The  man  selected  was 
William  J.  Duane,  of  Philadelphia.  He  had  been  asked  to 
take  the  office  as  early  as  December  4,  1832,  and  agreed  to 
do  so  on  the  30th  of  January,  1833.*  It  is  therefore  evi- 
dent that  the  removal  had  been  determined  upon  even  as 
early  as  this.  Duane  was  informed  immediately  by  R.  M. 
Whitney,  who  claimed  to  be  acting  for  the  president,  that 
the  deposits  were  to  be  removed.5  Soon  after  this  he  was 
visited  by  Kendall,  who  gave  him  the  same  information,6 
while  on  the  3d  of  June  Jackson  in  person  communicated 
his  intentions.  On  this  occasion  the  president  discovered  to 
his  dismay  that  Duane  was  unwilling  to  order  the  removal. 

1  Webster  to  Biddle,  New  York,  April  8,  1833,  B.  P. ;  R.  W.  Gibbes  to  Biddle, 
Baltimore,  April  13, 1833,  private,  ibid.,  pp.  13-16. 

2  Biddle  to  Webster,  April  8, 1833,  ibid. 

3  Cashier  R.  Smith  to  Biddle,  Washington,  April  15, 1833,  ibid. 

*  Letter  of  Duane,  Oct.  23, 1833,  NILES,  Vol.  XLV,  p.  272,  quoting  the  New  Orleans 
Bulletin;  and  Duane's  Exposition,  ibid.,  p.  236. 

5  DUANE' s  Narrative,  p.  5. 

6  Kendall  called  at  first  on  his  own  responsibility,  a  second  time  at  the  request 
of  Jackson.— Autobiography  of  Amos  Kendall,  p.  377. 


THE  WAR  ON  THE  BANK  293 

He  argued  the  question,  he  expostulated,  he  begged  his 
secretary  to  be  reasonable ;  but  the  stubborn  subaltern  would 
not  yield.  On  the  contrary,  he  argued  the  point  against  the 
president  with  equal  strenuousness,  ending  by  promising  to 
resign  if  he  could  not  see  his  way  clear  to  giving  the  required 
order. 

Hereupon  Kendall  was  sent  on  a  mission  to  the  state 
banks  to  see  if  they  could  be  persuaded  to  take  the  deposits 
on  terms  advantageous  to  the  administration.1  In  Duane's 
opinion  the  mission  was  a  failure,  and  Jackson's  plan  was 
certain,  if  carried  out,  to  plunge  the  "  fiscal  concerns "  of 
the  country  "  into  chaos." 2  Kendall  himself  is  said  to 
have  admitted  to  Jackson  that  the  "project  of  removing 
the  deposits  must  be  given  up.'"  Jackson  agreed  neither 
with  the  secretary  nor  with  his  agent.  His  purpose  was  not 
shaken  in  the  slightest  degree.  On  his  return  from  the 
eastern  trip  taken  in  the  summer  of  1833  he  told  Duane  that 
the  deposits  must  be  removed  and  that  he  would  take  the 
responsibility.  On  the  18th  of  September  he  read  his  fa- 
mous "paper"  to  the  cabinet,  in  which  he  gave  his  reasons 
for  the  removal  and  assured  the  cabinet,  as  he  had  assured 
Duane,  that  he  would  take  the  responsibility.  Duane,  how- 
ever, refused  to  budge  from  his  position.  He  then  exasper- 
ated Jackson  still  further  by  recalling  his  promise  to  resign. 
This  decision  was  taken  after  the  publication  of  the  presi- 
dent's paper,  an  act  which  Duane  considered  personally 
insulting.  The  publication  was  made  on  the  20th  of  Sep- 
tember, and  on  the  21st  Duane  sent  Jackson  a  long,  queru- 
lous letter,  giving  twelve  reasons  why  he  would  not  remove 

1  Kendall  received  his  instructions  July  23. —  Duane  to  Jackson,  Sept.  9,  1833, 
S.  D.  17,  23d  Cong.,  1st  Sess.,  p.  9.    His  mission  was  semi-public.— NIL.ES,  Vol.  XLV, 
p.  26,  note,  Sept.  7,  1833,  quoting  from  the  Pennsylvanian  of  about  Aug.  1.    The 
announcement  of  his  appointment  was  made  in  the  Globe  on  the  25th  of  July. 

2  DDANE'S  Narrative,  p.  96. 

3  SUMMER,  Jackson  (revised), p.  352,  quoting  Rives  in  1856,  in  the  Globe.    See  also 
Benton's  statement  that  "local  banks  were  shy  of  receiving  them  "  [i.  e.,  the  depos- 
its].— Thirty  Years,  Vol.  I,  p.  385. 


294  THE  SECOND  BANK  OP  THE  UNITED  STATES 

the  deposits,  refusing  to  resign,  and  rather  inconsequently 
subscribing  himself  "your  obedient  servant."1  Jackson 
returned  the  letter  forthwith,  whereupon  Duane  wrote  a  sec- 
ond, third,  and  then  a  fourth  in  quick  succession.  Jackson 
returned  the  third  and  fourth  as  "inadmissible,"  and  then 
gave  Duane  an  ignominious  dismissal,  concluding  a  curt, 
cutting  letter  to  him  with  these  words:  "I  feel  myself  con- 
strained to  notify  you  that  your  further  services  as  secretary 
of  the  treasury  are  no  longer  required."2 

Biddle  was  thoroughly  informed  of  the  relations  existing 
between  the  president  and  the  secretary,  and  knew  at  last 
that  the  determination  of  the  president  was  unalterable.  On 
the  30th  of  July  he  wrote  to  Robert  Lenox  that  "the  gam- 
blers are  doing  everything  in  their  power  to  bend  Mr.  Duane 
to  their  purposes,"  but  the  secretary  "will  not  yield  an 
inch." 3  Two  days  later  he  described  the  situation  so  cor- 
rectly that  there  can  be  no  doubt  that  he  had  confidential 
information:  "Duane  has  been  required  to  withdraw  the 
deposits  and  has  refused.  This  mission  [i.  e.,  Kendall's]  is 
now  got  up  to  prove  that  he  can  do  without  the  Bank  of  the 
United  States  and  then  he  will  be  again  asked  —  and  he  will 
again  refuse.  Then  he  will  either  leave  the  Treasury,  or 
have  conquered  the  Kitchen  Cabinet  —  in  either  case  the 
triumph  of  the  Bank  will  be  signal."  *  Biddle  was  therefore 
sufficiently  forewarned  of  the  president's  purpose  and  took 
precautions  accordingly.5 

Immediately  after  Duane's  dismissal,  Roger  B.  Taney,  a 
consistent  foe  of  the  bank,  who  had  all  along  urged  upon 
the  president  the  necessity  of  removing  the  deposits,6  was 

i  Duane's  Exposition,  NILES,  Vol.  XLV,  p.  237.  2  Ibid.,  pp.  237,  238. 

»  Biddlo  to  Lenox,  July  30, 1833,  P.  L.  B.,  Vol.  IV,  p.  518. 

*  Biddle  to  John  Potter,  of  Princeton,  Aug.  1, 1833,  ibid.,  p.  519;  and  to  T.  Cooper, 
July  31,  ibid. 

5  Warning  of  the  removal  was  given  by  the  papers  in  September.    Mr.  Duane,  it 
•was  said,  would  resign,  and  either  Taney  or  Kendall  be  appointed  secretary.— NILES, 
Vol.  XLV,  p.  33,  Sept.  14, 1833. 

6  Taney  to  Jackson,  Aug.  5, 1833,  TYLEB,  Memoir  of  R.  B.  Taney,  p.  195. 


THE  WAR  ON  THE  BANK  295 

appointed  secretary  and  executed  the  president's  design. 
The  bank's  stock  immediately  declined  1^  per  cent.1  The 
deposits  were  not  actually  removed.  On  the  contrary,  the 
administration  did  not  touch  the  government  funds  held  by 
the  bank,  hoping  thus  to  deprive  the  directors  of  an  excuse 
for  contracting  their  business.2  It  was  a  shrewd  move,  but 
had  little  effect.  The  mere  withholding  of  further  deposits, 
while  those  still  in  the  bank  were  gradually  withdrawn  in 
the  regular  course  of  the  government's  use  of  the  funds,  was 
sufficient,  in  the  opinion  of  most  men,  to  force  a  contraction. 
Besides,  the  phrase  "removal  of  the  deposits"  gained 
instant  currency,  and  the  assertion  that  they  were  not  removed 
passed  almost  unheeded. 

Besides  Taney,  the  other  thick-and-thin  supporters  of 
"  removal "  about  Jackson  were  Kendall  and  Blair,  Barry, 
and  Reuben  M.  Whitney.  The  members  of  the  cabinet, 
excepting  Barry  and  Taney,  were  either  hostile  to  the  act  or 
lukewarm  in  support.  Cass  allowed  himself  to  be  overruled ; 
Woodbury  said  he  was  with  the  president  now,  though 
opposed  earlier.3  Many  close  friends  of  the  president  sup- 

1 NILE3,  Vol.  XLV,  p.  65.    It  revived  by  Nov.  5.— Ibid.,  p.  166. 

2  "  It  is  contemplated,  we  understand,  not  to  remove,  at  once,  the  whole  of  the 
public  money,  now  on  deposite  in  the  bank  of  the  United  States,  but  to  suffer  it  to 
remain  there  until  it  shall  be  gradually  withdrawn,  by  the  usual  operations  of  tho 
government.    And  this  plan  is  adopted  in  order  to  prevent  any  necessity,  on  the  part 
of  the  bank  of  the  United  States,  for  pressing  upon  the  commercial  community ;  and 
to  enable  it  to  afford,  if  it  think  proper,  the  usual  facilities  to  the  merchants.    It  is 
believed,  that  by  this  means  the  change  need  not  produce  any  inconvenience  to  the 
commercial  community,  and  that  circumstances  will  not  require  a  sudden  and  heavy 
call  on  the  bank  of  the  United  States  so  as  to  occasion  embarrassment  to  the  institu- 
tion or  the  public."— Ibid.,  p.  51,  Sept.  21, 1833,  quoting  the  Globe  of  the  20th. 

"  A  sudden  transfer  of  a  large  specie  fund  would  certainly  enable  the  state 
banks  to  extend  their  accommodations,  and  make  the  money  market  easy ;  but  it 
would  be  followed  by  a  disastrous  reaction.  The  United  States  bank  being  thus  sud- 
denly weakened,  would  have  not  only  an  excuse,  but  a  justification  in  calling  upon 

her  debtors  with  the  greatest  urgency The  pressure  would  return  with  more 

rigor  than  ever,  and  the  blame  would  be  thrown  upon  the  government. 

"  We  must  not  expose  ourselves  to  such  an  attack.  If  the  bank  shall  produce  a 
pressure,  (as  she  certainly  can  by  unreasonable  calls  upon  her  debtors)  the  blame 
would  now  attach  to  herself,  and  she  will  not  have  even  a  pretence  for  casting  it 
upon  tho  government."— Letter  of  A.  Kendall,  Oct.  18, 1833,  ibid.,  p.  299. 

3  PAETON,  Vol.  Ill,  p.  508.    DUANE'S  Narrative  shows  this  plainly.    Van  Buren 
changed  to  the  president's  side  during  the  trip  to  tho  Hip-Raps,  much  to  McLane's 
disgust.— HAMILTON,  Reminiscenses,  p.  258;  KENDALL,  Autobiography,  p.  378. 


296  THE  SECOND  BANK  or  THE  UNITED  STATES 

ported  the  opinion  of  the  majority  of  the  cabinet,  consider- 
ing the  act  unjust,  and  above  all  impolitic.  A  large  propor- 
tion of  the  Democrats  were  in  the  position  of  Duane,  who 
had  always  been  "  opposed  to  the  United  States  bank,  and 
to  all  such  aristocratic  monopolies;  but  ....  considered 
the  removal  of  the  deposites,  unnecessary,  unwise,  vindic- 
tive, arbitrary,  and  unjust."1  These  opinions  were  sound, 
though  it  is  conceivable  that  the  president  might  secure  for 
his  act  of  overbearing  mastery  almost  as  many  supporters  as 
he  would  lose.  His  own  belief  that  the  policy  was  one  of 
justice  and  self-defense  would  in  the  long  run  be  that  of 
the  Democratic  masses,  for  Jackson's  mental  processes  were 
those  of  the  average  honest,  ignorant  man.  As  he  thought, 
so  they  would  think.  How  differently  different  men  would 
feel  is  evidenced  by  the  wish  of  Robert  Lenox  that  the 
president  would  remove  the  deposits  in  order  that  the  bank 
might  be  re-chartered,2  and  the  admiration  of  Benton  when 
it  was  done.3 

In  his  paper  read  before  the  cabinet  on  the  18th  of 
September,  and  prepared  for  him  by  Taney,4  Jackson  gave 
a  variety  of  reasons  for  the  removal:  The  bank  had  in- 
creased its  loans  in  1832  in  order  to  compel  a  re-charter; 
it  was  settled  by  the  campaign  of  that  year  that  the  charter 
should  not  be  renewed,  and  therefore  the  president  thought 
that  the  removal  could  not,  "with  due  attention  to  the  inter- 
ests of  the  people,  be  longer  postponed;"  Congress  could 
not  act  with  regard  to  the  deposits  until  the  secretary  had 
first  acted;  the  public  funds  were  probably  unsafe  in  the 
bank's  custody ;  it  had  interfered  to  hinder  payment  by  the 

1  Letter  of  Oct.  17,  1833,  NILES,  Vol.  XLV,  p.  178. 

2  Lenox  to  Biddle,  New  York,  July  29,  1833,  B.  P.    The  removal  was  actually 
"  desired  by  political  men  friendly  to  the  Bank."— I.  Bronson  to  J.  A.  Hamilton, 
Reminiscences,  p.  257. 

3 "  I  felt  an  emotion  of  the  moral  sublime  at  beholding  such  an  instance  of  civic 
heroism."— Thirty  Years,  Vol.  I,  p.  379. 
«  TTLEB,  Taney,  p.  204. 


THE  WAR  ON  THE  BANK  297 

treasury  of  the  3  per  cent,  stocks ;  had  mistreated  the  gov- 
ernment in  the  matter  of  the  French  indemnity  bill;  had 
refused  to  allow  the  government  directors  their  charter  privi- 
leges; had  conducted  business  with  less  than  a  quorum  of 
seven  directors;  had  spent  immense  sums  for  publications 
for  political  effect,  and  thus  corrupted  the  press.  Finally 
he  declared  that  the  responsibility  had  been  assumed  "as 
necessary  to  preserve  the  morals  of  the  people,  the  freedom 
of  the  press,  and  the  purity  of  the  elective  franchise."1 
One  would  search  the  constitution  in  vain  to  find  the  clauses 
giving  the  president  of  the  United  States  the  guardianship 
of  "  the  morals  of  the  people,  the  freedom  of  the  press,  and 
the  purity  of  the  elective  franchise,"  but  it  is  certain  that 
Jackson  thoroughly  believed  himself  endowed  with  such 
authority,  and  considered  this  a  sufficient  reason  for  his  action. 
Jackson's  act  precipitated  a  panic  in  a  market  already 
stringent  on  account  of  the  reductions  in  bank  accommoda- 
tions due  to  the  hostile  relations  between  the  administration 
and  the  bank.  The  withdrawal  of  the  deposits  necessarily 
had  this  result,  because  it  left  all  moneyed  interests  in  a 
condition  of  suspense  and  doubt,  put  monetary  affairs  on  a 
new  and  uncertain  basis,  and  gave  a  tremendous  shock  to 
public  confidence,  without  which  commercial  dealings  cannot 
continue.2  The  commercial  situation  was  further  aggravated 

i  Messages  and  Papers,  Vol.  Ill,  pp.  5-19. 

2 "The  increased  facilities  of  communication  and  inland  exchanges  have, 
within  the  last  years,  multiplied  to  an  extent  heretofore  unknown,  the  transactions, 
contracts  and  responsibilities,  between  the  several  cities,  and  between  the  cities  and 
even  the  most  remote  parts  of  the  country. 

"  The  regularity  with  which  the  enormous  mass  of  engagements  resulting  from 
those  transactions  spread  over  the  whole  country,  and  all  intimately  connected 
together,  can  be  discharged,  depends  entirely  on  an  uninterrupted  continuance  of 
the  ordinary  sales,  payments,  remittances  and  credits.  The  whole  machinery,  by 
which  business  in  all  its  various  branches  is  carried  on,  is  credit  extended  to  its 
utmost  limits.  Whatever  lessens  the  general  confidence,  on  which  credit  is  founded, 
must  necessarily  produce  a  fatal  derangement  and  interruption  in  every  branch  of 
business. 

"  It  is  with  this  state  of  things,  that,  without  any  necessity  or  investigation, 
the  executive  thought  proper  to  interfere."— Report  of  the  Union  Committee  of  New 
York,  March,  1834,  NILES,  Vol.  XL VI,  p.  76. 


298  THE  SECOND  BANK  OP  THE  UNITED  STATES 

at  this  moment  by  the  effects  of  the  compromise  tariff  law, 
which  introduced  a  new  system  of  paying  duties,  the 
importers  being  compelled  to  pay  at  once  and  not,  as  hereto- 
fore, after  six  months'  time.  The  consequence  was  that  an 
increased  demand  for  credit  was  occasioned,  at  the  very 
moment  that  it  could  least  be  met.1 

The  bank  immediately  answered  the  move  of  the  presi- 
dent by  increasing  a  contraction  already  begun.  In  this  it 
was  justified.2  The  only  question  was  how  far  the  contrac- 
tion was  to  go.  The  bank  would  certainly  not  be  justified 
in  contracting  after  its  own  safety  was  assured.  Where  this 
point  was  no  one  could  say  excepting  the  directors.  The 
massing  of  statistics  to  prove  that  the  bank  went  too  far,  or 
not  far  enough,  is  of  little  value,  if  taken  alone,  since  the 
amount  of  contraction  must  be  determined  at  each  moment 
by  the  peculiar  circumstances  of  that  moment,  and  what 
might  prove  an  ample  reserve  at  one  time  would  be  totally 
insufficient  at  another.  But  supposing  the  directors  to  go 
beyond  the  point  of  safety,  they  would  certainly  be  severely 
censurable,  since,  whether  legally  bound  or  not,  they  were 
morally  bound  to  protect  the  business  of  the  country  from 
harsh  shocks.  It  may  be  concluded,  therefore,  that  though 
the  president  of  the  United  States  was  responsible  for  the 
first  contractions  of  the  bank  and  for  the  sufferings  result- 
ing therefrom,  the  question  of  responsibility  for  later  con- 
tractions and  later  sufferings  remains  open. 

In  attempting  to  determine  in  how  far  the  board  of  direc- 
tors was  justified  in  its  policy,  the  reader  must  remember 
that  the  unceasing  hostility  of  the  administration  placed  the 
bank  in  a  very  precarious  position.  The  withdrawal  of  the 

1  Jaudon,  writing  to  Biddle  March  9, 1834,  says :    "  We  know  that  a  great  part  of 
the  present  pressure  arises  from  the  change  in  the  system  of  duties  and  other  causes 
that  are  temporary."— B.  P.    Hill,  of  New  Hampshire,  March  4, 1834,  pointed  out  that 
the  new  system  entailed  a  double  payment  of  duties  for  one  year  after  the  law  went 
into  effect.— C.  D.,  Vol.  X,  Part  I,  p.  797. 

2  Bronson's  opinion,  already  quoted,  is  conclusive  on  this  head. 


THE  WAB  ON  THE  BANK  299 

deposits  was  intended  to  weaken  it  and  put  it  in  the 
power  of  the  state  banks.1  If  the  executive  had  shown  will- 
ingness henceforth  to  let  the  bank  alone,  it  would  have  been 
morally  confined  to  more  restricted  limits  in  its  contraction. 
But  every  fresh  act  of  hostility  necessitated  a  further  reduc- 
tion, in  order  to  make  the  institution  perfectly  secure.  As 
such  acts  continued,  the  task  of  dividing  the  responsibility 
for  the  panic  of  1833-34  becomes  more  and  more  difficult. 
It  is  of  importance,  therefore,  to  determine  just  what  further 
aggressive  steps  were  taken  by  the  administration,  and  what 
other  events  affected  the  judgment  of  the  directors. 

In  the  autumn  of  1832  a  run  had  been  made  on  the 
Lexington  branch,  incited  without  doubt  by  political  oppo- 
nents.2 In  the  autumn  of  1833  a  demand  for  $350,000  in 
specie  was  suddenly  made  upon  the  branch  at  Savannah, 
which  could  be  met  only  because,  the  suspicions  of  the  board 
having  been  aroused  by  the  failure  of  the  bank  to  receive 
the  notes  of  the  Savannah  branch,  it  had  sent  large  supplies 
of  specie  there.  Biddle  had  no  doubt  that  the  administra- 
tion was  behind  this  attack.3 

The  dispute  over  the  French  Indemnity  Bill  aggravated 
the  situation.  The  United  States,  in  order  to  collect  the 
first  instalment  of  that  claim,  had  on  the  7th  of  February, 
1833,  sold  to  the  bank  a  bill  of  exchange  drawn  upon  the 
French  government.*  The  amount  was  $903,565.89.  The 

1 "  This  boasting  giant  is  now  but  a  reptile  beneath  the  feet  of  the  secretary  of  the 
treasury,  which  he  can  crush  at  will.  It  exists  by  his  forbearance,  and  will,  for  the 
next  forty  days ;  and  great  forbearance  will  it  require  to  save  it  from  destruction." — 
Kendall  in  a  letter  to  the  New  York  Standard,  Oct.  9, 1833,  NILES,  Vol.  XL.V,  p.  297. 

"  You  mention  that  the  Merchants'  bank  drew  $60,000  from  the  branch ;  this  will 
be  followed  by  other  draughts,  until  the  U.  States  bank  will  find  it  difficult  to  sustain 
the  branch  in  your  city.  As  things  now  are,  that  institution  must  keep  means  there 
to  meet  almost  all  its  entire  circulation,  and  it  will  have  to  become  a  great  collector 
of  specie  from  every  quarter  of  the  union,  for  the  ultimate  use  of  your  bank,  and 
others  who  may  want  it  at  New  York."— Letter  of  A.  Kendall,  Oct.  18, 1833,  ibid.,  p.  299. 

2H.  R.  121,  22d  Cong.,  2d  Sess.,  pp.  127-43;  also  Biddle  to  H.  Binney,  Dec.  3, 1833, 
P.  L.  B.,  Vol.  V,  p.  35, 

3  It  was  due  largely  to  the  "  Deposit  Banks  at  New  York  that  is  the  Treasury  at 
Washington."— Ibid. 

*MeLane  to  Biddle,  Feb.  7, 1833,  8.  D.  17,  23d  Cong.,  2d  Sess.,  pp.  266,  267. 


300  THE  SECOND  BANK  OP  THE  UNITED  STATES 

bank  presented  the  bill  in  Paris,  where  payment  was  refused, 
and  the  bill  went  to  protest.1  The  bank  would  have  been 
dishonored  if  the  firm  of  Hottinguer  et  Cie,  its  continental 
agent,  had  not  taken  up  the  bill  for  it.  The  bill  was 
returned  and  the  bank  sent  it  to  the  secretary  of  the 
treasury,  with  a  claim  for  the  principal,  interest,  cost  of 
protest,  re-exchange,  and  damages  at  15  per  cent.2  The 
claim  of  the  bank  to  the  damages  was  based  upon  a  statute 
of  Maryland,  which  was  law  in  the  District  of  Columbia.3 
Secretary  McLane  at  once  paid  the  principal,  but  not  the 
other  items.*  In  answer  to  a  letter  from  Biddle  in  June, 
Secretary  Duane  admitted  the  validity  of  all  the  other 
claims  excepting  that  for  damages,  to  which  Attorney- 
General  Taney  declared  that  the  bank  had  no  claim  either 
"  in  law  or  in  equity."  5  Having  given  this  opinion,  Taney 
was  requested  to  give  his  reasons  for  it,  but  so  long  as  he  was 
attorney-general  he  refused  to  give  them.6  Not  only  so,  but 
after  becoming  secretary  of  the  treasury  he  completely  ig- 
nored the  bank's  claim.  Woodbury  when  secretary  followed 
Taney's  example.  Thus  affairs  stood  from  May  16,  1833, 
until  July  2,  1834,  on  which  date  Secretary  Woodbury 
finally  declined  to  pay  the  damages.7  The  bank  thereupon 
notified  the  secretary  that  the  sum  claimed  would  be 
deducted  from  the  government's  part  of  the  semi-annual 
bank  dividend.8  On  the  16th  of  July  this  was  done,  the 
amount  plus  interest  to  that  date  being  retained.9  The  sum 

1  Jaudon  to  McLane,  April  26, 1833.  S.  D.  17,  23d  Cong.,  2d  Sess.,  p.  271. 

2  Same  to  same,  May  13, 1833,  ibid.,  pp.  271,  272. 
3H.  R.  312,  22d  Cong.,  1st  Sess.,  p.  20. 

*  McLane  to  Biddle,  May  16, 1833,  8.  D.  17,^233  Cong.,  2d  Sess.,  p.  272. 

5  Duane  to  Biddle,  June  21, 1833,  and  opinion  of  Attorney-General  Taney,  May 
24, 1833,  ibid.,  p.  273.    The  other  items  were  all  paid.— 2  HOWARD,  734. 

6  Duane  to  Taney,  Aug.  14, 1833,  8.  D.  17,  23d  Cong.,  2d  Sess.,  p.  273 ;  Taney  to 
Duane,  Aug.  15,  ibid.,  p.  276;  Duane  to  Taney,  Aug.  16,  ibid.;  Taney  to  Duane,  Aug. 
16,  ibid.,  p.  277. 

7  Biddle  to  Woodbury,  July  8, 1834,  ibid.,  p.  279. 

8  Ibid.  9  Jaudon  to  Woodbury,  July  16, 1834,  ibid.,  p.  281. 


THE  WAR  ON  THE  BANK  301 

was  $170,041.18.  The  bank's  action  was  the  only  one  left 
to  it,  since  the  administration  refused  either  to  pay  or  to  sub- 
mit the  question  to  a  judicial  decision,1  and  could  not  be 
sued.  Consequently  the  corporation  was  bound  to  retain 
the  money  if  the  claim  was  ever  to  be  adjudicated.  The 
directors  justified  the  demand  for  the  damages  by  the  "  uni- 
versal and  inflexible  rule  of  the  Treasury  department," 
which  had  always  compelled  the  payment  of  the  damages  in 
cases  of  this  character.2  Their  action  was  good  business, 
but  bad  politics,  for  it  gave  the  administration  a  chance  to 
charge  the  corporation  with  seizing  public  funds,  and  thus 
increased  its  unpopularity. 

The  retention  of  the  dividend,  however,  brought  the  de- 
sired response  from  the  administration.  Secretary  Wood- 
bury  censured  the  act  of  the  corporation  in  an  acrimonious 
letter,3  while  Attorney-General  Butler  drew  up  reasons  in 
support  of  Taney's  assertion  that  the  bank's  claim  had  "  no 
foundation  in  law  or  in  equity."  *  The  government  then 
instituted  suit  to  recover  the  dividend  withheld,  and  in  the 
circuit  court  for  Pennsylvania  won  its  case  on  the  fine  dis- 
tinction that  the  bank  was  an  indorser  and  not  the  holder  of 
the  bill.5  This  decision  was  reversed  by  the  Supreme  Court 
in  1844,6  which  expressed  the  opinion  that  the  United  States 
was  bound,  both  by  law  and  equity,  to  pay  the  damages.7 
The  case  was  retried  in  the  lower  court  in  1847,  but  came 
again  before  the  Supreme  Court  on  a  writ  of  error,  the 
government  claiming  that  as  a  sovereign  power  it  was  not 
subject  to  the  law  merchant.  The  court  affirmed  this  view, 

1  Woodbury  to  Biddle,  July  8, 1834,  ibid.,  p.  281. 

2  See  Qirard's  case,  where  under  the  law  of  Pennsylvania  the  government  col- 
lected 20  per  cent,  damages  for  a  protest  of  two  of  Girard's  bills  on  Paris.— Ibid.,  pp. 
258-61.    See  also  other  cases,  ibid.,  pp.  261-3. 

3  Woodbury  to  Biddle,  Dec.  11, 1834,  ibid.,  p.  284. 

*  Butler  to  Woodbury,  Nov.  28, 1834,  8.  D.  2,  23d  Cong.,  2d  Sess.,  pp.  57  ff. 

5  See  2  HOWARD,  733,  review  of  the  case  by  Justice  McLean. 

6  Taney,  C.  J.,  did  not  sit.  7  2  HOWARD,  734  ff.    January  term,  1844. 


302  THE  SECOND  BANK  OP  THE  UNITED  STATES 

and  judgment  was  entered  against  the  bank.1  This  ended 
the  matter.  It  is  only  necessary  to  add  that  the  nation's 
honor  was  forfeit  by  the  refusal  to  pay  the  damages.  On  pre- 
cisely the  same  plea  it  might  have  refused  to  pay  the  prin- 
cipal and  interest. 

At  the  time  of  the  withholding  of  the  deposits,  members 
of  the  administration  naturally  feared  retaliatory  measures. 
To  avert  any  injury  likely  to  accrue  to  the  state  banks, 
Taney  resolved  to  protect  them  by  intrusting  to  certain  of 
the  deposit  banks  drafts  for  large  amounts  on  the  public 
funds  left  in  the  Bank  of  the  United  States.  These  sums 
were  to  be  drawn  for  if  the  institution  called  upon  the  state 
banks  for  payments  of  balances  due  in  coin,  or  refused  to 
receive  branch  notes  given  in  payment  of  government  dues 
at  places  where  they  were  not  made  payable.2  The  Union 
Bank  of  Maryland  received  three  drafts  for  the  sum  of  $100,- 
000  each  ;3  the  Girard  Bank  of  Philadelphia,  one  draft  for 
$500,000;  and  the  Bank  of  America,  the  Mechanics  Bank, 
and  the  Manhattan  Company  Bank  of  New  York  city,  each 
one  draft  for  $500,000.*  Thus  fortified,  it  was  calculated 
that  any  "superfluity  of  naughtiness"  of  which  the  Bank  of 
the  United  States  might  be  guilty  in  trying  to  draw  specie 
from  banks  which  owed  specie  but  had  no  specie,  could  be 
met  and  turned  to  the  discomfiture  of  the  aggressor. 

The  Union  Bank  of  Maryland  received  its  three  drafts 
on  the  3d  and  4th  of  October ;  on  the  5th  it  concluded  that 
the  time  for  action  had  come,  and  presented  two  of  them, 
one  at  Baltimore  and  the  other  at  Philadelphia.  The  pre- 

1 5  HOWARD,  394  ff.  Taney  and  Woodbury  were  both  on  the  bench  at  the  time. 
Neither  sat. 

2  The  cashing  of  these  drafts  constitutes  all  the  removal  of  deposits  there  ever 
was.    The  rest  of  the  government  funds  in  the  bank  were  withdrawn  in  the  ordinary 
course  of  paying  government  debts. 

3  Taney  was  a  stockholder  in  this  bank.— Taney  to  the  Senate,  April  3, 1834, 8.  D. 
238,  23d  Cong.,  1st  Sess.,  pp.  18, 19. 

*  Taney  to  deposit  banks,  Sept.  3  to  Oct.  4, 1833,  8.  D.  16,  23d  Cong.,  1st  Sess.,  pp. 
321,322,329,337,338. 


THE  WAR  ON  THE  BANK  303 

text  for  this  astonishing  action  was  that  the  Bank  of  the 
United  States  had  demanded  coin  from  the  Baltimore  banks.1 
The  truth  was  that  the  Union  Bank  was  in  straits.2  Its 
president  admitted  that  he  had  departed  from  the  secretary's 
instructions,  having  swelled  his  discount  list  enormously, 
but  pleaded  the  justification  of  the  necessity  of  helping  the 
commercial  interests.3  His  action  embarrassed  Taney,  but 
he  did  not  hesitate  to  repeat  it,  and  had  the  third  draft 
cashed  at  Baltimore  on  the  4th  of  November,  the  Bank  of 
the  United  States  having  drawn  on  the  Union  Bank  for 
$125,000  owed  to  it  by  that  institution.* 

The  Girard  Bank  received  its  check  on  the  3d  of  October, 
and  with  this  security  against  calls  for  specie  boldly  pro- 
ceeded to  expand  its  business.  By  the  10th  of  October  the 
bank  had  done  this  to  such  a  degree  that  it  had  "  made  a 
very  sensible  impression  on  the  moneyed  market " 5 —  such  a 
"sensible  impression,"  indeed,  that  it  had  placed  itself  in  a 
position  where  the  use  of  the  draft  was  almost  necessary  for 
its  own  safety.  In  this  state  of  affairs  it  besought  permis- 
sion to  have  the  draft  cashed  if  it  thought  circumstances 
demanded,  without  waiting  for  any  decided  attack  on  the 
part  of  "  the  monster." '  The  president  of  the  bank  believed 
that  it  ought  to  continue  to  extend  its  operations  and,  if  the 

1  Ellicott  to  Taney,  Oct.  8, 1833,  ibid.,  p.  327. 

»  Kendall  thus  explains  the  "transfer  draft"  transaction  at  Baltimore:  The 
drafts  were  cashed  before  Taney  had  a  chance  to  receive  an  explanation.  Ellicott, 
at  Taney's  request,  came  to  Washington.  Kendall  was  present  at  the  interview. 
Taney  wanted  to  know  why  the  drafts  had  been  cashed.  "Mr.  Ellicott  made  a 
stammering,  incoherent  statement  about  transactions  in  connection  with  a  bank  in 
Tennessee,  and  upon  his  conclusion  Mr.  Kendall  said,  'If  I  understand  you,  Mr. 
Ellicott,  you  have  used  those  government  funds  to  sustain  a  stock  speculation.'  To 
this  statement  of  the  case,  Ellicott  virtually  assented."  Taney  was  much  annoyed, 
Ellicott  being  his  special  adviser  on  financial  subjects. —  KENDALL,  Autobiography, 
•p.  389.  See  pamphlet  Bank  of  Maryland  Conspiracy,  by  ELLICOTT,  for  an  explana- 
tion of  the  affair,  pp.  68-75. 

3 Ellicott  to  Taney,  Oct.  8, 1833,  8.  D.  16,  23d  Cong.,  1st  Sess.,  p.  328. 
*  Cashier  Mickle  to  Taney,  Nov.  4, 1833,  ibid. 

5  President  Schott  of  the  Girard  Bank  to  Taney,  Oct.  10, 1833,  ibid.,  p.  332. 

6  Ibid.,  pp.  332,333. 


Bank  of  the  United  States  called  for  specie,  present  the 
check.  On  November  2  the  Girard  Bank  owed  the  Bank 
of  the  United  States  $149,000,  and  the  time  for  action  had 
come.  Biddle  was  given  his  choice:  either  to  permit  the 
Girard  Bank  to  continue  its  course,  by  not  calling  for  the 
payment  of  the  balances  in  coin,  or  to  pay  the  $500,000.* 
He  insisted  that  the  draft  be  cashed.2  He  feared  that  by 
chance  or  design  these  large  sums  might  be  called  for  at  a 
time  or  at  a  place  where  they  could  not  be  paid. 

The  three  banks  in  New  York  acted  in  concert.  On  the 
16th  of  November  they  concluded  that  it  was  necessary  to 
present  one  of  the  drafts  for  $500,000,  the  bank  having  at 
that  date  drawn  on  the  banks  of  the  city  for  over  $100,000.3 
The  Manhattan  Bank,  therefore,  presented  its  draft  on  the 
18th  and  received  prompt  payment.*  Taney  had  now  be- 
come anxious  about  the  remaining  drafts,  and  desirous  of 
having  them  returned  to  him.5  On  the  21st  of  November, 
therefore,  one  of  them  was  remitted  to  Washington,8  and  no 
further  use  was  made  of  this  means  of  protection  or  offense. 

The  particular  atrocity  of  this  mode  of  granting  to 
deposit  banks  the  means  of  drawing  heavily  upon  the  Bank 
of  the  United  States  lay  in  the  fact  that  no  notice  was  given 
that  institution  that  these  drafts  were  out ;  and  a  sudden 
call  for  sums  ranging  from  $100,000  to  $1,500,000  might 
have  ruined  it.  Yet  this  was  not  all.  The  bank  had  always 
been  furnished  with  a  weekly  list  of  treasury  drafts  issued 7 
and  also  from  1829  with  a  daily  list  of  all  warrants  out.8  It 

1  Schott  to  Taney,  Nov.  2, 1833,  S.  D.  16,  23d  Cong.,  1st  Sess.,  p.  333. 

2  Same  to  same,  Nov.  2, 1833,  ibid.,  pp.  334,  335. 

3  Newbold  to  Taney,  Nov.  16, 1833,  and  White  to  Taney,  Nov.  18, 1833,  ibid.,  p.  349. 
*  White  to  Taney,  ibid. 

5  Taney  to  Newbold,  Nov.  16  and  Nov.  20, 1833,  ibid.,  pp.  341,  342. 
«  Newbold  to  Taney,  Nov.  21,  1833,  ibid.,  p.  351. 
i  Jaudon  to  Campbell,  Nov.  5, 1833,  ibid.,  p.  358. 
*Same  to  same,  Nov.  15, 1833,  ibid.,  p.  359. 


THE  WAR  ON  THE  BANK  305 

had  a  right  to  expect  that  this  would  continue  to  be  the  case 
until  notice  annulling  the  arrangements  was  given.  As  a 
matter  of  course,  the  daily  business  of  the  institution  was 
conducted  with  the  lists  of  warrants  and  drafts  always  in 
view,  and  with  the  certainty  that  the  bank  was  thus  prepared 
for  all  calls  from  the  government.  Now  in  these  lists  no 
information  had  been  given  of  the  drafts  issued  by  Taney.1 
The  treasurer,  in  answer  to  Jaudon's  remonstrances,  acknowl- 
edged that  lists  were  furnished  to  the  bank,  but  defended 
the  action  of  Taney  on  the  ground  that  these  were  special 
drafts.  If  they  had  been  included  in  the  lists,  the  sums 
would  have  been  at  once  deducted  from  the  treasurer's 
account,  and  it  was  hoped  all  along  that  no  necessity  would 
arise  for  their  use.  They  were  "  contingent  drafts." 2  To  a 
further  communication  of  Jaudon's  the  treasurer  answered 
that  the  agreement  was  to  give  daily  notice  of  warrants 
drawn,  but  not  of  "transfer  drafts."3  To  this  subterfuge 
Jaudon  replied  by  showing  that  the  drafts  were  not  in  any 
sense  transfer  drafts,  but  warrants.  Admitting,  however, 
the  treasurer's  contention  that  they  were  not  warrants,  and 
therefore  not  placed  on  the  daily  lists,  yet  all  drafts  appeared 
on  the  weekly  lists.4  To  this  the  treasurer  had  no  reply, 
and  so  discreetly  made  none. 

In  January,  1834,  the  administration  took  another  ag- 
gressive step.  Congress,  by  an  act  of  the  3d  of  March, 
1817,  had  transferred  to  the  bank  the  functions  of  the  commis- 
sioners of  loans,  including  the  duty  of  paying  all  pensions 
in  states  where  it  had  branches.  Where  it  had  no  branches 
it  was  to  designate  the  state  banks  which  should  act  as  pen- 
sion agents.5  An  attempt  was  now  made  to  deprive  the 

1  Same  to  same,  Nov.  5, 1833,  ibid.,  p.  358. 

2  Campbell  to  Jaudon,  Nov.  8, 1833,  ibid.,  p.  354. 

3  Same  to  same,  Nov.  25,  ibid.,  pp.  355,  356. 

*  Jaudon  to  Campbell,  Dec.  9, 1833,  ibid.,  p.  361. 

t>  Statutes  at  Large,  Vol.  Ill,  p.  360,  chap.  38.    Charter,  sec.  15.    See  Appendix  I. 


306  THE  SECOND  BANK  OP  THE  UNITED  STATES 

bank  of  the  exercise  of  its  functions  in  respect  to  cer- 
tain pension  laws.  This  was  not  the  first  time  that  some- 
thing of  the  sort  had  been  tried.  In  1829  the  transfer 
of  the  pension  funds  from  the  branch  at  Portsmouth  had 
been  attempted,  but  the  effort  failed.1  In  1831  a  similar 
attempt  was  made  to  remove  the  pension  agency  at  New 
York  to  Albany.  The  bank  again  remonstrated,2  and  in 
March,  1832,  Secretary  Cass  admitted  that  in  his  opinion 
the  War  Department  was  "  not  warranted  in  appointing  a 
pension  agent,  in  any  State  or  Territory,  where  the  United 
States  Bank  has  established  one  of  its  branches." 3  In  1834 
the  action  was  based  on  a  new  plea.  The  administration 
contended  that  the  acts  of  May  15,  1828,  and  June  7,  1832, 
were  not  pension  acts,  strictly  speaking,  but  that  they  were 
laws  allowing  pay  to  the  old  Revolutionary  veterans.  Of 
course,  for  the  sake  of  convenience,  these  sums  were  treated 
as  pensions ;  and  the  pension  office  had  control  of  the  pay- 
ments, and  the  pension  agencies  disbursed  them.  But  all 
this  was  simply  because  they  were  like  pensions,  not  because 
they  were  pensions.4  Accordingly,  on  January  2,  1834,  the 
commissioner  of  pensions  ordered  the  bank  to  give  up  the 
books,  accounts,  and  funds  relating  to  pensions  disbursed 
under  the  act  of  June  7,  1832.5  The  bank  bluntly  refused 
to  do  so.6  President  Jackson  was  in  a  towering  rage,  and 
on  the  4th  of  February  communicated  to  Congress  his  com- 
plaint.7 As  a  matter  of  course,  the  Senate  decided  that  the 
bank  was  in  the  right  and  the  House  declared  that  the 

1  Secretary  Eaton  to  President  Mason,  Aug.  3, 1829,  and  J.  L.  Edwards  to  same, 
Aug.  25, 1829,  H.  R.  460,  22d  Cong.,  1st  Sess.,  pp.  476-9. 

2  Biddle  to  the  acting  secretary  of  war,  July  15, 1831,  ibid.,  p.  481. 

3  Cass  to  Biddle,  March  1, 1832,  ibid.,  p.  489. 

*  Argument  of  Attorney-General  Butler,  Feb.  3,1834,  H.  R.  263,  23d  Cong.,  1st 
Sess.,  pp.  10-22.    See  also  Opinions  of  the  Attorney  Generals. 

5  Ex.  Doc.  78,  23d  Cong.,  1st  Sess.,  p.  23. 

6  Biddle  to  secretary  of  war,  Jan.  23, 1834,  H.  R.  263,  23d  Cong.,  1st  Sess.,  p.  22. 
i  C.  D.,  Vol.  X,  Part  I,  pp.  461,  462;  Part  II,  p.  2615. 


THE  WAR  ON  THE  BANK  307 

bank  was  in  the  wrong.1  In  this  state  of  affairs  there  was 
no  means  of  compelling  the  corporation  to  accede  to  the 
demands  of  the  administration,  and  it  did  not  yield. 

This  issue  was  skilfully  made  so  as  to  bring  odium  upon 
the  bank.  The  commissioner  of  pensions  had  not  only 
ordered  the  institution  to  deliver  the  books  and  papers,  but 
also  to  pay  no  more  pensions  under  the  act  of  June  7,  1832.2 
The  secretary  of  war  assenting  to  this  order,  no  pensions 
were  paid  under  the  act.  The  result  was  that  many  poor 
veterans  of  the  Revolution  could  not  draw  their  meager 
allowances  when  they  needed  them.  The  blame  for  this 
deprivation  fell  entirely  upon  the  bank,  though  the  fault  was 
with  the  government.3  It  is  easy  to  imagine  that  many 
people  were  much  moved  over  an  act  which  seemed  oppres- 
sive to  the  aged  soldiers,  while  the  enemies  of  the  bank 
made  effective  political  capital  out  of  the  situation.  It  "  will 
not  spare  the  holy  remnant  of  the  officers  and  sires  of  the 
revolution,"  declared  Senator  Wilkins,  with  maudlin  pathos. 
"So  sweeping  and  unsparing  are  they  determined  to  make 
the  distress,  that  even  a  solitary  soldier  of  the  revolution 
cannot  escape." 4  The  same  tone  of  injured  indignation 
was  employed  by  all  the  Democrats. 

Webster  accordingly  urged  Biddle  to  surrender  the  funds. 
"  The  Attorney  General's  argument,"  he  wrote,  "  is  a  weak 
one;  it  is  easy  to  demolish  it,  as  an  argument.  But,  after 
all,  it  is  a  bad  subject  to  dispute  about.  The  pensioners 

1  Report  of  Senator  Clayton,  S.  D.  92,  23d  Cong.,  1st  Sess.,  and  Folk's  report,  H.  R. 
263,  23d  Cong.,  1st  Sess. 

2  Ex.  Doc.  78,  23d  Cong.,  1st  Sess.,  p.  23. 

3  "  If  any  inconvenience  should  be  felt  by  any  of  those  veterans  of  the  revolu- 
tion, as  the  committee  believe  it  will  be  by  all  by  the  delay  which  will  take  place  in 
the  payment  of  the  next  annuity  due  to  them,  it  is  to  be  attributed  to  the  unjusti- 
fiable conduct  of  the  Bank  in  interposing  to  thwart  the  views  of  Government,  in  with- 
holding from  the  officers  of  Government  the  public  money  and  public  property,  to 
which  they  do  not  pretend  to  have  any  claim.    The  committee  cannot  condemn  in 
terms  too  strong  the  conduct  of  the  bank  in  this  transaction."— Folk's  report,  H.  R. 
263,  23d  Cong.,  1st  Sess.,  p.  7. 

<Feb.  6, 1834,  C.  D.,  Vol.  X,  Part  I,  p.  489. 


308  THE  SECOND  BANK  OP  THE  UNITED  STATES 

will  not  believe  that  the  '  Old  Soldier '  is  the  cause  of  keep- 
ing back  their  money,"  therefore  it  would  be  "better  to  give 
up  the  fund  and  the  papers." ]  In  this  opinion  he  was 
heartily  supported  by  Representative  Gorham.2  The  advice 
fell  upon  deaf  ears.  The  bank  had  the  support  of  the  law, 
and  it  would  not  yield.  Woodbury,  in  his  report  of  De- 
cember 12,  1834,  remarks  that  the  bank  is  still  employed 
to  pay  pensions,  "  under  an  impression  that  it  had  ....  a 
right  to  perform  these  duties,  until  relinquished  by  its  own 
consent,  or  until  the  acts  were  repealed."  He  is  careful  to 
add  that  the  two  acts  in  dispute  are  not  regarded  in  this 
light,3  and  the  administration  persisted  in  paying  these  pen- 
sions, though  under  almost  insurmountable  difficulties.4 

Another  cause  of  strife  was  found  in  the  acts  of  the  gov- 
ernment directors.  Jackson  believed  that  these  directors 
were  designed  by  the  charter  to  keep  a  watchful  eye  upon 
the  acts  of  the  bank  in  the  interest  of  the  public,5  and,  since 
he  was  the  representative  and  the  custodian  of  the  public's 
interests,  to  report  to  him  if  they  had  any  reason  for  sus- 
pecting abuses  or  mismanagement.  In  1833  Messrs.  Gilpin, 
Wager,  Sullivan,  and  McElderry,  government  directors, 
sharing  his  opinion,  forwarded  to  him  reports  respecting 
those  transactions  of  the  bank  of  which  they  did  not 
approve.6  Moreover,  they  systematically  opposed  the  other 
directors  in  regard  to  the  powers  of  the  exchange  commit- 
tee, the  authority  of  the  president,  the  curtailments  in  the 

1  Webster  to  Biddle,  Feb.  12, 1834,  B.  P. 

2  Webster  to  J.  G.  Watmough,  Feb.  12,  1834,  ibid.    Gorham  added  a  note  to 
Webster's  letter. 

3  S.  D.  13,  23d  Cong.,  2d  Sess.,  p.  3. 

*  Biddle  to  A.  Porter,  June  20, 1834,  P.  L.  B.,  Vol.  V,  p.  240. 

5  This  opinion  finds  support  in  the  debates  when  the  bank  was  chartered.    See 
WEIGHT'S  argument,  A.  of  C.,  14th  Cong.,  1st  Sess.,  Vol.  I,  p.  1118,  and  FOESTTH'B, 
ibid.,  p.  1144. 

6  Papers  A  and  B,  April  22, 1833,  and  Aug.  19, 1833,  S.  D.  2,  23d  Cong.,  1st  Sess., 
pp.  22  ff.    See  also  their  memorial  to  Congress,  Dec.  9, 1833,  Ex.  Doc.  12,  23d  Cong.,  1st 
Sess.,  pp.  1  ff. 


THE  WAR  ON  THE  BANK  309 

West,  and  the  measures  taken  against  the  administration.1 
Naturally  they  were  not  welcomed  at  the  board  in  Phila- 
delphia, nor  taken  into  the  complete  confidence  of  Biddle 
and  his  coadjutors,  nor  appointed  to  the  important  commit- 
tees of  the  bank.2 

In  these  circumstances,  Jackson  renominated  all  of  them 
as  government  directors  for  the  year  1834. 3  Biddle  was 
immediately  in  arms,  and  wrote  long  letters  to  all  the  sena- 
tors friendly  to  him,  urgently  pressing  the  rejection  of  the 
nominations.*  "  They  are  people  unfit  to  be  there  [i.  e.,  in 
the  directorate]  —  unfit  to  associate  with  the  other  members 
—  so  that  their  colleagues  will  not  confer  with  them — or 
act  with  them  on  committees." 5  The  board  "  having  no  confi- 
dence in  them,  they  were  not  allowed  to  know  anything."  6 
He  also  wanted  Taney's  nomination  to  the  Treasury  Depart- 
ment rejected.7  Webster  remonstrated  against  these  meas- 
ures, advising  as  little  opposition  to  persons  as  possible.8 
Again  his  good  advice  went  unheeded.  The  strong-willed 
president  of  the  bank  had  his  way,  and  the  Senate  finally 
rejected  Taney's  nomination,  and  refused  by  a  vote  of  20  to 
25  to  concur  in  the  nominations  for  government  directors.9 
The  president,  inflexible  as  always,  returned  the  names  to 
the  Senate,10  and  again  it  refused  by  a  vote  of  11  to  30  to 


1  See  their  reports,  ibid. 

2  Third  paragraph  of  Paper  A,  report  of  April  22, 1833,  pp.  22,  23. 

3  Jackson  to  the  Senate,  Dec.  17, 1833,  S.  D.  333,  23d  Cong.,  1st  Sess.,  p.  1. 

*To  N.  Silsbee,  T.  Ewing,  D.  Webster,  George  Poindexter,  H.  Clay,  Dec.  23, 1833, 
P.  L.  B.,  Vol.  V,  pp.  56-9. 

5  Biddle  to  Webster,  Dec.  20, 1833,  ibid.,  p.  60.    Binney  in  the  House  in  January, 
1834,  intimated  that  it  might  be  difficult  to  get  gentlemen  to  sit  beside  the  govern- 
ment directors.— C.  D.,  Vol.  X,  Part  II,  p.  2357. 

6  Biddle  to  Watmough,  Jan.  6, 1834,  P.  L.  B.,  Vol.  V,  p.  81. 

7  Biddle  to  Webster,  Dec.  20, 1833,  ibid.,  p.  60. 

8  Webster  to  Biddle,  Dec.  13, 1833,  B.  P. 

98.  D.  333,  23d  Cong.,  1st  Sess.,  p.  3,  Feb.  27, 1834. 
»o  Jbid.,  p.  4,  March  11.  " Ibid.,  p.  15,  May  1. 


310  THE  SECOND  BANK  OP  THE  UNITED  STATES 

In  the  end,  Jackson  made  other  nominations.  Two  of  the 
nominees,  Messrs.  Ellmaker  and  Tibbetts,  were  disqualified 
as  not  being  stockholders,  and  were  therefore  refused  seats 
at  the  board.1  Three  other  gentlemen  declined  appoint- 
ments, and  accordingly  for  the  year  1834  the  government 
had  only  two  directors.2  On  the  14th  of  October  Jackson 
notified  them  that  he  wanted  certain  information  regarding 
the  expenses  and  profits  of  the  bank.3  They  at  once  made  a 
call  for  the  necessary  books,  adding  that  they  sought  infor- 
mation for  the  use  of  the  president  of  the  United  States.4 
Their  right  to  examine  the  books  was  incontestable,  yet  the 
bank  could  not  permit  these  to  be  used  to  secure  informa- 
tion which  would  be  employed  to  injure  the  institution,  and 
Biddle  wrote  Jaudon  that  they  must  not  be  permitted  "  to 
look  at  any  thing."5  Hence  the  cashier  refused  their  re- 
quest.6 They  immediately  sent  in  a  complaint  to  Jackson.7 
This  again  placed  the  bank  in  a  bad  light  before  the  people. 
If  there  was  nothing  to  conceal,  nothing  to  fear,  why  this 
refusal  ?  Besides,  the  refusal  itself  was  an  infringement  of 
the  rights  of  the  government  directors.  To  these  arguments 
the  bank  had  no  adequate  defense. 

Then  there  were  fresh  difficulties  created  in  reference  to 
the  branch  notes  and  drafts.  Benton  declared  that  the  bank 
had  conspired  to  embarrass  the  state  banks  and  the  nation 
by  refusing  to  receive  the  notes  of  distant  branches.8 
Nothing  could  be  more  inaccurate.  It  is  true  that  the 
officers  of  the  branches  at  New  York,  Mobile,  and  Balti- 

1 S.  D.  17,  23d  Cong.,  2d  Sess.,  pp.  35,  291-6.          2  ibid.,  p.  35 

3  Ex.  Doc.  45,  23d  Cong.,  2d  Sess.,  p.  1.  *  Letter  of  Oct.  24, 1834,  ibid.,  p.  4. 

5  "  If  during  my  absence  the  Government  Directory  either  singly  or  together 
should  wish  to  look  at  any  thing,  books,  papers,  &c,  they  should  be  told  that  it  can- 
not be  seen  without  application  to  the  Board.  If  they  apply  to  the  Board,  refuse  it 
positively  whatever  be  the  consequences."— Biddle  to  Jaudon,  Newport,  July  16, 
1834,  B.  P. 

«  Letter  of  Oct.  29, 1834,  Ex.  Doc.  45,  23d  Cong.,  2d  Sess.,  p.  2. 

1 1bid.    The  letter  of  Oct.  29  detailed  the  whole  proceeding. 

«  C.  D.,  Vol.  X,  Part  I,  pp.  106, 107. 


THE  WAR  ON  THE  BANK  311 

more  had  shown  an  inclination  not  to  receive  notes  of  other 
branches  from  the  state  banks.1  But  they  had  never  re- 
ceived all  branch  notes  at  par  from  these  banks,  and  their 
only  intention  was  to  continue  the  usual  custom.2  But  a 
new  face  was  put  upon  the  matter  since  the  "  pet  banks " 
now  received  the  revenue  and  most  of  the  revenue  was  paid 
in  "  uncurrent  notes " 3  of  the  Bank  of  the  United  States.* 
When  the  bank  had  received  the  revenue  it  necessarily  took 
all  its  notes  in  payment  of  revenue  at  par,  since  they  were 
offered  on  behalf  of  the  government.  Now,  however,  if  the 
old  plan  of  not  accepting  such  notes  at  par  from  the  state 
institutions  was  continued,  the  revenues  collected  by  them 
would  be  redeemed  by  the  Bank  of  the  United  States  at  a 
loss  to  the  state  banks.  Again,  such  action  might  nullify 
one  great  purpose  of  a  bank's  establishment  —  the  purifica- 
tion of  the  currency  —  for  if  the  bank  should  refuse  to 
receive  its  notes  at  par,  from  the  state  banks,  they  would 
depreciate  to  a  considerable  extent,  since  all  the  notes  which 
used  to  come  to  it  from  the  revenues  came  to  it  now  from 
the  state  banks.  Was  not  the  bank  bound  to  receive  these 
notes  as  coming  indirectly  from  the  government  ?  The  state 
banks  thought  so,5  and  the  government  concurred  in  the 
opinion.6  On  the  other  hand,  if  it  did  receive  them  it 
threw  down  all  restrictions  on  the  receipt  of  the  issues  of  its 
branches,  for  there  was  no  method  by  which  it  could  dis- 
criminate notes  received  by  the  state  banks  in  payment  of 
duties  from  those  received  in  the  ordinary  course  of  business. 

1  Ibid.,  and  8.  D.  24,  23d  Cong.,  1st  Sess.,  pp.  2-4,  7. 

2  Letters  of  Oct.  1,  2,  and  5, 1833,  S.  D.  17,  23d  Cong.,  2d  Sess.,  pp.  120, 123. 

3  Notes  of  other  offices  not  taken  at  par  from  state  banks  or  individuals. 

*  Fleming  to  Taney,  Oct.  2,  and  White  to  Taney,  Oct.  5, 1833,  S.  D.  16,  23d  Cong., 
1st  Sess.,  p.  345;  see  alsoS.  D.  17,  23d  Cong.,  2d  Sess.,  p.  124. 

5  Newbold  to  Taney,  Oct.  2, 1833,  ibid.,  p.  344 ;  cashier  of  Union  Bank  of  Maryland 
to  cashier  of  branch  of  the  Bank  of  the  United  States,  ibid.,  p.  325.    See  also  S.  D.  24, 
23d  Cong.,  1st  Sess.,  pp.  2-4,  7. 

6  Taney  to  banks  in  Philadelphia  and  Baltimore,  Oct.  3, 1833,  8.  D.  17,  23d  Cong., 
2d  Sess.,  pp.  321,  329. 


312  THE  SECOND  BANK  OP  THE  UNITED  STATES 

Consequently  it  would  have  to  redeem  all  notes  offered  by 
the  state  banks.  This  was  the  position  which  it  was  finally 
forced  to  take.  It  was  actually  compelled  to  give  to  its 
branch  notes  a  greater  currency  than-  ever  before,  receiving 
them  from  everybody  at  their  face  value  at  all  the  Atlantic 
offices.1  It  did  this  because  it  feared  by  doing  otherwise  to 
create  a  demand  upon  distant,  unprotected  branches.2 

In  regard  to  the  branch  drafts,  the  president  repeatedly 
threatened  that  he  would  prohibit  their  receipt  in  payment 
of  government  dues.3  A  rumor  that  such  action  would  be 
taken  was  current  as  early  as  February  8, 1833.*  The  direc- 
tory fully  expected  that  orders  to  cease  receiving  them  would 
be  issued  in  January,  1834,  and  adverted  to  the  fact  as  a 
reason  for  further  contraction.5  The  supporters  of  Jackson 
further  justified  the  bank  in  contracting  its  business  by 
"  loudly  calling  upon  those  who "  took  "  part  with  them  to 
collect  and  present  the  notes  of  the  bank  of  the  United 
States,  for  payment  in  coin. " 

The  foregoing  acts  of  the  administration  must  be  kept 
clearly  in  mind  in  reviewing  the  action  of  the  bank  in 
1833-34.  These  measures  show  the  temper  of  Jackson  and 
his  allies,  and  they  palliate,  to  some  extent,  whatever  retalia- 

i "  And  until  such  instructions  are  given,  we  wish  you  to  receive  all  the  issues  of 
the  bank  and  offices  that  may  be  offered  to  you,  from  whatever  quarter  the  tender 
may  be  made."— Cashier  of  the  Bank  of  the  United  States  to  the  cashier  of  the  New 
York  office,  Oct.  5, 1833,  S.  D.  17,  23d  Cong.,  2d  Sess.,  p.  123;  see  also  NILES,  Vol.  XLV, 
p.  97. 

*  "  One  of  the  grounds  upon  which  the  committee  determined  that  no  refusal  to 
receive  branch  notes  ought  to  be  made  was,  that  the  issues  of  the  offices  ought  to  be 
paid  at  the  points  where  the  offices  had  provided  the  means,  and  that  their  provision 
having  been  made  at  the  Atlantic  cities  principally,  it  was  not  right  to  throw  their 
notes  back  upon  them."— Cashier  of  the  Bank  of  the  United  States  to  cashier  of  Bal- 
timore office,  Oct.  8, 1833,  S.  D.  17,  23d  Cong.,  2d  Sess.,  pp.  123, 124. 

3  Jackson  to  Baltimore  committee,  Feb.  6,  1834,  NILES,  Vol.  XL VI,  p.  31;  to 
Philadelphia  committee,  Feb.,  1834,  ibid.,  p.  9. 

*  Ibid.,  Vol.  XLV,  p.  393;  Webster,  C.  D.,  Vol.  X,  Part  I,  p.  542. 

SBiddle  to  presidents  of  the  branches,  Jan.  22  to  Feb.  1, 1834,  S.  D.  17, 23d  Cong., 
2d  Sess.,  pp.  77-83. 

e  NILES,  Vol.  XLV,  p.  393,  Feb.  8, 1834. 


THE  WAR  ON  THE  BANK  313 

tory  measures  the  bank  adopted.  They  furnished  plenty  of 
reason  for  taking  steps  to  protect  its  interests.  Indeed, 
there  could  be  but  one  policy  to  follow  in  any  case,  for  the 
institution  expected  to  go  out  of  existence  in  March,  1836. 
It  ought,  therefore,  to  diminish  its  operations. 


CHAPTER  XIII 
THE  CONTRACTION  AND  PANIC  OF  1833-34 

THE  bank's  operations  to  curtail  began  on  the  13th  of 
August,  1833,  and  ceased  effectually  on  the  llth  of  July, 
1834,1  and  entirely  on  the  16th  of  September.  It  will  be 
noticed  that  the  curtailments  began  before  the  deposits  were 
removed,  and  this  was  one  of  the  bitterest  charges  of  the 
bank's  enemies.2  Justification,  if  justification  were  needed, 
was  found  in  the  bank's  knowledge  that  the  deposits  would 
probably  be  removed.  Biddle  was  not  afraid,  but  consid- 
ered caution  desirable : 

Although  we  do  not  feel  anxious  as  to  the  movements  at  Wash- 
ington touching  the  Bank,  still  it  is  thought  prudent  to  prepare  for 
any  adverse  event  and  accordingly  we  have  this  day  given  instruc- 
tions to  the  Branches  to  keep  their  discounts  at  their  present 
amount  —  and  to  shorten  the  time  for  which  they  buy  bills  of  ex- 
change. This  will  make  the  institution  strong  and  if  any  sudden 
movement  is  attempted  by  the  cabinet,  proper  or  improper,  we  shall 
be  ready.3 

The  contraction  took  two  directions — the  amount  of 
money  loaned  on  discounts  was  not  to  be  increased,  and  bills 
of  exchange  were  to  be  drawn  only  at  short  dates,  and  mostly 
on  the  eastern  offices.  These  measures  would  not  only  result 
in  a  contraction,  but  would  also  render  assistance  in  the 
work  of  winding  up  the  bank's  affairs,  for  the  bills  of 
exchange  bought  on  the  East  would  transfer  the  bank's  capi- 
tal to  that  part  of  the  country,*  while  the  discounts,  being 

i  Tyler's  report,  S.  D.  17,  23d  Cong.,  2d  Sess.,  pp.  16-18. 
2BENTON,  C.  D.,  Vol.  X,  Part  I,  p.  106. 
3  To  Webster,  Aug.  13, 1833,  P.  L.  S.,  Vol.  IV,  p.  526. 

*  Report  of  Committee  on  Offices  of  the  Bank,  April  8, 1834,  S.  D.  17, 23d  Cong.,  2d 
Sess.,  p.  98. 

314 


CONTRACTION  AND  PANIC  OP  1833-34        315 

kept  stationary,  would  aid  in  putting  an  end  to  the  local 
business  of  the  branches.  As  discounts  would  not,  in  the 
normal  course  of  business,  go  higher  until  the  late  autumn 
months,1  there  was  little  hardship  in  this  part  of  the  policy. 
The  question  of  real  reduction  was  involved  in  the  orders 
relating  to  bills  of  exchange.  Bills  were  to  be  purchased  at 
a  term  of  only  ninety  days.  The  western  offices  might,  it 
is  true,  draw  at  four  months  for  the  purpose  of  paying  a  debt 
already  existing,  but  not  otherwise.  Such  bills  might  be 
drawn  on  whatever  branch  could  secure  the  money  to  pay 
them,  but  all  others  were  to  be  payable  at  the  Atlantic 
offices.2  This  order  evidently  looked  toward  a  reduction  in 
the  bank's  loans,3  for  it  put  an  end  to  the  drawing  of  the 
western  offices  on  each  other,  and  materially  shortened  the 
term  of  bills.  The  whole  movement  was  justifiable,  and  was 
intended  only  for  the  protection  of  the  bank. 

This  first  effort  to  lessen  business  was  soon  followed  by 
more  stringent  measures.  On  the  24th  of  September,  Presi- 
dent Jackson's  "  paper"  having  been  made  public  meanwhile, 
a  committee  of  seven  directors  was  appointed  to  "take  into 
consideration  what  measures "  were  necessary  "  in  conse- 
quence of  the  recent  intimations  that  the  deposites  of  the 

1  It  must  be  recollected  that  the  bank's  business  always  fell  off  in  the  summer 
months,  and  always  rose  in  the  autumn  and  winter  months,  and  therefore,  when  it  is 
found  falling  in  these  latter  months,  one  may  conclude  either  that  the  course  of 
business  is  unusual,  or  that  the  bank's  curtailments  are  very  effective. 

2  "1.  Resolved,  That  for  the  present,  and  until  the  further  order  of  the  board,  the 
amount  of  bills  discounted  shall  not  be  increased  at  the  bank  and  the  several  offices. 

"2.  Resolved,  That  the  bills  of  exchange  purchased  at  the  bank,  and  all  the 
offices,  except  the  five  western  offices,  shall  not  have  more  than  ninety  days  to  run. 

"3.  Resolved,  That  the  five  western  offices  be  instructed  to  purchase  no  bills  of 
exchange,  except  those  payable  in  the  Atlantic  cities,  not  having  more  than  ninety 
days  to  run,  or  those  which  may  be  received  in  payment  of  existing  debts  to  the  bank 
and  the  offices,  and  those  not  having  more  than  four  months  to  run." — Ibid.,  p.  73. 

3  "Whatever  of  restriction  they  [i,  e.,  the  orders]  contain, will,  I  trust,  be  tem- 
porary."— Circular,  Aug.  13, 1833,  addressed  to  all  the  offices  with  the  exception  of 
the  five  western  branches. 

"  It  is  a  subject  of  regret  to  be  obliged  to  impose  any  restraint  on  yonr  business, 
especially  on  your  operations  in  exchange,  to  which  wo  attach  a  particular  value." 
—Letter  addressed  to  the  presidents  of  the  five  western  branches,  ibid.  pp.  73,  74. 


316  THE  SECOND  BANK  OP  THE  UNITED  STATES 

government  are  to  be  removed."  l  The  committee's  report 
was  adopted  October  1.  At  this  crisis  the  bank  had  many 
fears.  It  had  reason  to  anticipate  that  the  public  funds  still 
in  its  vaults  would  be  removed  ;  that  a  demand  upon  it  for 
specie  would  be  created,  since  the  revenue  would  be  col- 
lected by  the  selected  banks  largely  in  its  paper  ;  and  that  its 
circulation  would  be  forced  in  by  the  action  of  the  adminis- 
tration, which  might  create  a  panic  among  its  note-holders. 
It  was  justified,  therefore,  in  taking  further  steps  to  restrict 
its  business. 

The  plan  now  adopted  had  three  objects:  to  reduce  dis- 
counts; to  extend  the  restrictions  on  the  drawing  of  bills  to 
all  the  offices  ;  and  to  collect  the  balances  against  state  banks, 
while  restricting  the  receipt  of  state-bank  notes.2  Even  now 
Biddle  held  that  the  orders  were  not  intended  to  produce  an 
excessive  scarcity  of  bank  accommodations.  On  the  day 
that  the  resolutions  were  adopted  he  wrote: 

We  are  all  satisfied  that  the  best  thing  to  be  done  is  to  do  as 
little  as  possible.  The  exchange  operations  are  placed  by  the  reso- 
lutions passed  to-day  on  a  proper  footing.  We  do  not  give  any  in- 
structions as  to  reducing  the  local  discounts,3  but  we  shall  reduce 
ours  at  the  Bank,  and  if  you  can  gradually  diminish  yours  without 
exciting  uneasiness  among  our  customers  it  would  be  very  good 
policy.  Our  wish  is  not  to  give  an  order  to  that  effect  lest  it  might 
create  alarm,  but  to  do  it  quietly  and  imperceptibly.* 

The  reduction  of  discounts  was  to  be  made  by  the  1st  of 
January,5  and  was  to  aggregate  $5,825,906.74.'  The  dis- 
tribution of  the  curtailment  is  instructive.  In  New  Eng- 
land the  amount  was  to  be  only  $237,000;  in  the  south- 
eastern states,  $938,900;  in  the  valley  of  the  Mississippi  and 
its  tributaries,  $2,204,200;  in  the  middle  states,  $2,445,000. 
The  five  western  offices  were  to  contract  to  the  extent  of 


.  17,  23d  Cong.,  2d  Sess.,  p.  74.  2  Documents  5  and  6,  ibid.,  pp.  74.  75. 

3  J.  e.,  at  New  York.  *  Biddle  to  Lenox,  Oct.  1,  1833. 

5  See  circular  of  Oct.  12,  1833,  ibid.,  p.  75.       «  Ibid.,  p.  94. 


CONTRACTION  AND  PANIC  OP  1833-34        317 

$1,156,700.  It  will  thus  be  seen  that  by  far  the  greatest 
contraction  in  proportion  to  business  done  was  to  take  place 
at  these  offices.1  The  heaviest  proportional  reductions  were 
to  be  at  Natchez  and  Nashville.2 

In  respect  to  bills  of  exchange,  six  more  branches  were 
placed  under  the  restrictions  imposed  upon  the  five  western 
ones  in  August,  while  the  others  were  to  purchase  bills  only 
on  the  Atlantic  cities,  New  Orleans,  and  Mobile,  and  at 
ninety  days.3  Exchange  business  was  necessarily  limited  by 
this  short  period  and  by  the  limitation  of  time  and  place  in 
drawing  bills.  The  main  restriction  imposed  in  October, 
however,  was  caused  by  a  rearrangement  of  the  rates  of 
exchange.  They  were  made  1  per  cent,  from  the  western 
offices  upon  all  others  except  those  on  the  Atlantic,  on  which 
bills  could  be  drawn  at  ^  per  cent. ;  1^  per  cent,  on  the  West 
from  the  eastern  offices  or  from  those  at  New  Orleans  and 
Mobile.  These  measures  were  intended  to  force  the  buying 
of  bills  on  the  East,  thus  bringing  home  the  capital  of  the 
bank  and  restricting  the  bill  business  very  materially.4 

1  These  reductions  are  severe,  yet  they  do  not  include  reductions  which  would 
necessarily  ensue  upon  the  observance  of  the  restrictions  placed  upon  exchange  busi- 
ness.   Hence  the  curtailment  was  intended  to  be  more  considerable  than  appeared 
on  the  surface. 

2  This  latter  branch  was  given  the  privilege  of  renewing  old  bills  at  six  months 
instead  of  four.— Ibid.,  p.  76.    Nashville  was  the  center  of  the  bad  banking  of  the 
West. 

'"1.  Resolved,  That  the  resolution  of  the  13th  August  last,  relative  to  the  pur- 
chase of  bills  of  exchange  at  the  five  western  offices,  be  extended  to  the  offices  at 
Burlington,  Utica,  Buffalo,  Pittsburgh,  Natchez,  and  New  Orleans. 

"2.  Resolved,  That  all  the  other  offices  be  instructed  in  like  manner,  not  to  pur- 
chase bills  of  exchange,  except  on  the  Atlantic  cities,  and  New  Orleans  and  Mobile, 
not  having  more  than  ninety  days  to  run." — Ibid.,  p.  74. 

*"3.  Resolved,  That  the  rates  of  collection  and  purchase  of  bills  of  exchange,  at 
the  bank  and  the  several  offices,  be  increased,  so  that  they  shall  be  as  follows : 

1  One  and  a  half  per  cent,  from  the  Atlantic  offices  to  the  western  offices. 

'Half  per  cent,  from  the  western  offices  to  the  Atlantic  offices. 

'  One  per  cent,  from  the  Atlantic  offices  to  the  New  Orleans  and  Mobile  offices. 

'  One  per  cent,  from  the  New  Orleans  and  Mobile  offices  to  the  Atlantic  offices. 

'  One  per  cent,  from  one  western  office  to  another  western  office. 

'  One  per  cent,  from  the  western  offices  to  the  New  Orleans  and  Mobile  offices. 

'  One  and  a  half  per  cent,  from  the  New  Orleans  and  Mobile  offices  to  the  west- 
ern offices. 


318  THE  SECOND  BANK  OP  THE  UNITED  STATES 

State-bank  balances  and  dealings  with  state  banks  con- 
stituted the  third  subject  on  which  action  was  taken.  No 
branch  was  to  take  the  notes  of  the  state  banks  outside  of 
the  city  in  which  it  was  established.  The  debts  due  by 
these  banks  were  to  be  collected  in  specie  or  in  drafts  on 
the  Atlantic  cities,  and  balances  were  not  to  be  permitted 
henceforth  to  accumulate.1  This  action  would  create  intense 
pressure  on  the  state  banks,  since  specie  was  hard  to  obtain, 
and  drafts  on  the  East  meant  precisely  the  same  thing. 

Whatever  Biddle  might  say,  these  orders  were  certain  to 
create  pressure.  All  the  measures  were  harsh.  The  reduc- 
tion in  discounts  was  immense,  and  was  to  be  compassed  in 
a  brief  period.  If  it  were  successful,  much  suffering  was 
inevitable;  the  dealings  in  exchange  as  restricted  would 
occasion  even  more  distress,  while  the  action  against  the 
state  banks  would  compel  them  to  contract,  and  thus  increase 
the  pressure.  On  the  whole,  nothing  but  peril  to  the  bank 
could  excuse  these  measures. 

The  attempt  to  curtail  did  not  end  here.  On  the  17th  of 
October  a  second  circular  was  issued  to  the  branches  in  the 
West  and  a  few  others,  urging  perseverance  in  "  the  course 
of  measures  already  prescribed,"  while  the  contraction  was 
aggravated  by  two  additions.  Drafts  on  the  northern  Atlan- 
tic offices  were  to  be  avoided,  and  an  extra  attempt  was  to  be 

"  One  per  cent,  from  an  office  north  of  Washington  to  an  office  south  of  Wash- 
ington. 

"  One  per  cent,  from  an  office  south  of  Washington  to  an  office  north  of  Wash- 
ington. 

"  Quarter  per  cent,  from  the  offices  north  of  Washington  to  each  other. 

"  Half  per  cent,  from  the  offices  south  of  Washington  to  each  other. 

"  Subject  to  such  modifications  at  the  respective  offices  as  the  Committee  of 
Exchange  of  this  bank  may  deem  expedient."— S.  D.  17,  23d  Cong.,  2d  Sess.,  p.  74. 

i "  4.  Resolved,  That  no  notes  of  State  banks  be  received  on  deposite,  except 
of  such  as  are  established  in  the  same  place  with  the  office  receiving  them,  but  they 
may  be  received  at  the  discretion  of  the  office  in  payment  of  a  pre-existing  debt. 
Provided,  that  the  notes  of  such  State  banks  as  by  arrangement  keep  a  balance  at 
their  credit,  for  the  redemption  of  their  notes  may  be  received  as  heretofore. 

"5.  Resolved,  That  all  the  balances  due  by  distant  State  banks  be  collected 
either  in  specie,  or  in  drafts  on  the  Atlantic  cities,  and  that  such  balances  be  not 
permitted  to  accumulate."— Ibid.,  p.  75. 


CONTRACTION  AND  PANIC  OP  1833-34        319 

made  to  keep  down  circulation.1  Not  satisfied  with  this,  a 
further  contraction  in  discounts  was  ordered  on  January  23, 
1834,  to  the  sum  of  $3,320,000,  to  be  completed  by  the  first 
days  of  March  and  April.2  As  before,  the  largest  reduction 
was  to  take  place  at  the  western  and  southwestern  offices.3 
New  regulations  were  also  imposed  upon  the  exchange  busi- 
ness. The  localities  on  which  bills  could  be  drawn  were 
still  further  limited.  Henceforth  the  western  offices  were  to 
draw  only  on  New  Orleans,  Baltimore,  and  the  Atlantic 
offices  north  of  Baltimore,  and  such  bills  must  be  for  only 
ninety  days.*  These  instructions  thus  prohibited  the  western 
offices  from  drawing  on  one  another,  while  the  New  Orleans 
office  Was  forbidden  to  purchase  bills  "  payable  at  places  in 
the  Mississippi." 8  These  measures  were  rendered  still  harsher 
by  another  increase  in  the  rate  of  exchange,  which  was  again 
regulated  so  as  to  discriminate  sharply  against  the  western 
branches.  The  rate  went  up  1  per  cent,  for  all  bills  drawn 
on  these  offices,  no  matter  from  what  part  of  the  Union.6 

1  Circular  of  Oct.  17,  ibid.,  p.  77.    Biddle  feared  some  action  against  the  bank's 
circulation  on  the  part  of  the  government. — To  R.  Lenox,  of  New  York  city,  Oct.  1, 
1833,  P.  L.  B.,  Vol.  V,  p.  16. 

2  Letters  to  the  offices,  8.  D.  17,  23d  Cong.,  2d  Sess.,  pp.  77-83,  94. 

3  Mississippi  valley       -       $1,600,000       Middle  states   -       -       -    $1,020,000 
New  England    -       -        -      200,000       Southern  states  -       -       -    500,000 

*  "  To  purchase  no  bills  of  exchange  except 

"First.  Those  payable  in  Baltimore,  and  the  Atlantic  cities  north  of  it  not 
having  more  than  ninety  days  to  run  to  maturity 

"  Second.  Those  payable  in  New  Orleans,  having  not  more  than  ninety  days  to 
run  to  maturity." — Biddle  to  western  offices  and  office  at  Natchez,  Jan.  22, 1834,  ibid., 
p.  77. 

5  Biddle  to  Montgomery,  Jan.  24, 1834,  ibid.,  p.  81. 

6  Increase  in  rate  of  exchange : 

In  October,      In  January, 
1833  1834 

Atlantic  offices  to  five  western   ....  114  2Yt 

Western  offices  to  Atlantic Yt  1A 

Atlantic  to  New  Orleans  and  Mobile  1  2 

West  to  West 1  forbidden 

New  Orleans  and  Mobile  to  West     ...  1»£  forbidden 

North  of  Washington  to  south  of  Washington  1  1 

South  of  Washington  to  north  of  Washington  1  1 

West  to  New  Orleans  and  Mobile         -       -       -  1  2,  to  N.  O.  alone 

North  of  Washington  to  north  of  Washington  &  Ji 

South  of  Washington  to  south  of  Washington  %  1A  and  1 

— Ibid.,  pp.  74,  75,  77-83. 


320  THE  SECOND  BANK  or  THE  UNITED  STATES 

These  restrictions  would  be  severely  felt,  for  it  was  here  that 
distress  would  be  most  easily  produced,  since  by  breaking 
up  the  system  of  bill  purchases  in  the  western  and  south- 
western cities  pressure  would  immediately  be  exercised  upon 
those  whose  accommodations  were  entirely  in  this  species  of 
loan.  It  must  be  remembered,  too,  that  the  purchase  of 
bills  was  frequently  an  operation  by  which  the  planter 
secured  the  means  of  growing  his  crop,  and  that  when  these 
means  were  refused  he  was  immediately  at  the  end  of  his 
resources.  Not  only  so,  but  individuals  who  were  accommo- 
dated had  to  pay  very  heavily  for  the  favor.  Finally,  those 
who  had  been  accustomed  to  transfer  funds  by  means  of  the 
bank's  system  were  so  heavily  charged  that  it  became  more 
profitable  to  pay  for  the  carriage  of  specie  than  to  buy 
drafts.  In  short,  the  breaking  up  of  the  exchange  system 
of  the  bank  created  immediate  and  widespread  distress. 

These  various  measures  remained  in  full  force  until  the 
llth  of  July,  1834,  when  it  was  determined  that  the  bank's 
business  in  discounted  notes  should  suffer  no  further  diminu- 
tion,1 but,  on  the  other  hand,  it  was  not  to  be  increased.2 
The  restrictions  on  exchange  were  affected  but  slightly. 
New  York  was  permitted  to  purchase  bills  on  the  southern 
and  southwestern  offices  at  four  months,  and  to  any  amount. 
But  the  rate  of  exchange  was  not  diminished;  and,  indeed, 
for  bills  drawn  at  over  ninety  days  the  rate  was  to  be  -| 
per  cent,  higher.8  Trade  in  western  bills  was  still  dis- 
couraged.4 In  the  month  of  September  all  restrictions  were 
at  last  removed. 

1 "  Resolved,  That  the  instructions  hitherto  given  for  a  reduction  of  the  amount 
of  bills  discounted  at  the  bank  and  the  several  offices,  are  hereby  revoked ;  and  that 
the  line  of  bills  discounted  at  the  several  offices  shall,  until  the  further  order  of  this 
board,  remain  at  its  present  amount."—  S.  D.  17,  23d  Cong.,  2d  Sess.,  p.  84. 

2  Even  before  this,  special  exceptions  had  been  made  in  favor  of  New  York  and 
liouisville.— Ibid.,  pp.  Ill,  112. 

3  Eyre  to  Lawrence,  July  18, 1834,  ibid.,  p.  85. 

•  *  Eyre  to  Pittsburg  branch,  Aug.  1, 1834,  ibid.,  p.  86. 


CONTRACTION  AND  PANIC  OP  1833-34 


321 


Taking  all  the  measures  together,  and  from  the  1st  of 
August,  1833,  to  the  1st  of  April,  1834,  a  reduction  in  dis- 
counts had  been  contemplated  to  the  amount  of  $13,300,000 
— a  preposterously  large  sum.  To  this  must  be  added  the 
restriction  occasioned  by  the  breaking  up  of  the  exchange 
dealings  of  the  bank.  This  could  be  calculated  at  not  less 
than  $5,000,000.  The  whole  contraction,  then,  would  be  at 
least  $18,300,000  out  of  $62,000,000.  What  was  the  actual 
result  ? 

The  board  of  directors  alleged  that  the  entire  reduction 
to  the  1st  of  April,  1834,  was  only  $5,047,527. 12.1  They 
counted  from  the  1st  of  October,  however,  while  the  con- 
traction had  actually  begun  in  August,  and  counting  from 
that  month,  $4,000,000  must  be  added  to  their  estimate. 
Of  this  total  of  $9,000,000,  $7,000,000  was  in  discounts, 
$2,000,000  in  bills  of  exchange.  By  July  1  the  entire 
reduction  was  $13,000,000  — nearly  $9,000,000  in  discounts, 
the  rest  in  exchange.2  Such  an  enormous  reduction  had 
never  before  been  undertaken.  It  was  equal  to  over  one- 
fifth  ot  the  bank's  entire  dealings.3 

The  distribution  of  this  reduction  is  interesting.  Of  the 
first  curtailment  ordered,  the  South  succeeded  in  diminish- 
ing its  discounts  to  less  than  one-half  the  amount  demanded. 

1  Ibid.,  p.  99. 

2  By  September  the  total  reduction,  reckoning  from  August,  1833,  was  $1.7,000,000 
—  $8,400,000  in  discounts,  and  $8,800,000  in  exchange. 

LOANS  AND  DISCOUNTS 
Total  Loans 

3  Aug.  1,1833 $64,100,000 

Oct.  1 60,000,000 

Jan.  1,  1834 54,900,000 

April  1 54,800,000 

Julyl 51,000,000 

Sept.  1 47,000,000 

REDUCTIONS 

Aug.  to  Oct.,  1833        ....  $  4,100,000 

To  Jan. ,1834 9,200,000 

To  April 9,300,000 

To  July 13,100,000 

To  Sept. 17,100,000 


Discounts 

Bills  of  Exchange 

$43,200,000 

$20,900,000 

42,200,000 

17,800,000 

38,600,000 

16,300,000 

36,100,000 

18,700,000 

34,400,000 

16,600,000 

34,800,000 

12,100,000 

$1,000,000 

$3,100,000 

4,600,000 

4,600,000 

7,100,000 

2,200,000 

8,800,000 

4,300,000 

8,400000 

8,800,000 

322  THE  SECOND  BANK  OP  THE  UNITED  STATES 

In  the  section  comprising  the  Southwest  and  the  West  the 
branches  did  much  better,  reducing  to  about  the  extent  of 
two-thirds  of  what  was  required.  Here  the  five  western 
offices  were  the  chief  delinquents,  reducing  only  $789,000 
out  of  $1,705,000  expected.1  By  April  they  were  a  little 
more  successful.2  Up  to  this  time,  however,  the  increase  in 
the  exchange  business  of  the  West  and  Southwest  well-nigh 
offset  all  reductions  made  in  the  item  of  bills  discounted. 
By  the  end  of  February  it  was  over  $4,000,000  in  excess  of 
what  it  had  been  in  October,  and  did  not  diminish  until 
after  April,  the  total  business  done  in  the  valley  aggregating 
in  that  month  just  about  what  it  had  been  in  the  beginning 
of  October,  1833.  Final  orders  to  cease  curtailing  in  the 
West,  however,  were  not  issued  until  September,  1834,  and 
by  that  time  the  contraction  had  accomplished  all  that  could 
possibly  be  desired.  In  discounts  the  business  was  dimin- 
ished by  $3,300,000,  and  in  exchange  by  $3,400,000.3  The 
reduction  at  the  five  western  offices  was  $3,500,000,  and 
only  Louisville  and  Natchez  had  failed  to  meet  the  demand.4 
The  collection  of  state-bank  balances  had  been  the  third 
part  of  the  bank's  plan  to  strengthen  its  position.  When 
this  action  was  taken  in  October,  1833,  the  state  banks  were 

1  In  the  South,  counting  from  Oct.  1  to  Jan.  1,  the  reduction  was  $802,000,  as 
against  $1,973,000  ordered ;  in  the  West  and  Southwest,  $1,954,000,  against  $2,968,000 
ordered. 

2  By  April  the  reductions  should  have  aggregated  in  the  South,  $2,673,000;  in  the 
Mississippi  valley  and  the  West,  $4,568,000;  in  the  five  western  cities,  $2,705,000.    They 
were,  respectively,  $1,200,000,  $3,125,000,  $1,800,000.    The  South  was  most  at  fault,  then 
the  five  western  offices.    Yet  there  was  nothing  like  the  failure  to  respond  shown  in 
1832-33. 

3  Offices  of  New  Orleans,  Nashville,    Mobile,  Natchez,  St.   Louis,  Cincinnati, 
Louisville,  and  Lexington : 

Total  Loans  Discounts          Bills  of  Exchange 

1833,  Aug.  1  -                    $24,158,000  $15,296,000  $  8,852,000 
Oct.  1  -       -          21,425,000  14,217,000  7,208,000 

1834,  Jan.  1  -       -       -     22,025,000  12,106,000  9,919,000 
March  1  -       -          22,991,000  11,579,000  11,412,000 
April  1  -       -       -      21,407,000  11,092,000  10,315,000 
July  1  -       -          17,052,000  10,762,000  6,290,000 
Sept.  1  -       -       -      14,864,000  10,987,000  3,877,000 

*S.  D.  17,  23d  Cong.,  2d  Sess.,  pp.  78, 110. 


CONTRACTION  AND  PANIC  OF  1833-34        323 


CHART   IV 


na 

60 
55 
50 
45 
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20 

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55 
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Total  accommodation* 

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Bilk  oi  exchange 
Total  depocit* 

CONTRACTION  OP  1833-34 


324  THE  SECOND  BANK  OF  THE  UNITED  STATES 

in  debt  to  the  Bank  of  the  United  States  to  the  extent  of 
$2,200,000.  By  January,  1834,  the  debt  had  been  reduced 
to  $1,500,000,  and  by  the  1st  of  April  it  was  $500,000.  The 
measure  created  distress,  as  was  clearly  evident  from  the 
strenuous  opposition  offered  to  it  by  the  banks  of  New  York 
city  in  March,  1834.1 

The  question  of  the  severity  of  the  contraction  of 
1833-34  is  not  entirely  determined,  however,  until  its 
effect  upon  the  circulation,  the  deposits,  and  the  supply  of 
specie  is  considered.  On  the  issues  the  effect  is  marked,  the 
circulation  being  reduced  $3,200,000  from  the  1st  of  August, 
1833,  to  the  1st  of  October,  1834,  the  lowest  point  it  had 
reached  since  August,  1830.  Individual  deposits  in  the 
same  period  fell  off  $3,300,000.  Meanwhile  the  bank's  stock 
of  specie,  representing  a  further  diminution  in  the  circulat- 
ing medium  of  the  country,  increased  enormously.  The  sum 
was  $10,023,000  at  the  beginning  of  August,  1833.  It  was 
$15,500,000  at  the  end  of  September,  1834.  It  had  never 
before  reached  within  $4,000,000  of  that  sum.  During  the 
period  of  the  contraction  cash  liabilities  were  never  in  excess 
of  $30,000,000,  a  fact  which  proves  that  the  bank  never 
was  in  any  danger.  The  greater  part  of  this  immense  in- 
crease must  have  been  extracted  from  the  circulation  in  the 
United  States,  largely  by  means  of  collecting  state-bank  bal- 
ances. If  Taney  was  correct  in  his  views  of  the  effect  of 
such  an  operation  by  the  Bank  of  the  United  States,  the  cir- 
culation of  the  country  must  have  been  diminished  by  $20,- 
000,000  through  this  hoarding  of  specie.2 

i "  In  March  of  that  year  [i.  e.,  1834]  a  committee  of  the  merchants  and  bankers 
of  New  York  informed  him  [i.  e,,  Mr.  Biddle]  that  unless  he  changed  his  course,  and 
would  agree  to  their  terms,  which  were  that  the  United  States  Bank  should  cease  to 
call  upon  the  other  banks  for  its  balances  for  thirty  days,  his  course  would  be 
denounced  at  the  adjourned  meeting  of  the  exchange." —  APPLETON,  Currency  and 
Banking,  p.  60. 

2  Taney  argued  that  for  every  dollar  in  specie  withdrawn  from  the  circulation 
the  state  banks  had  to  call  in  from  four  to  five  dollars  of  their  paper.— Ex.  Doc.  2, 
23d  Cong.,  1st  Sess.,  p.  9. 


CONTRACTION  AND  PANIC  OP  1833-34        325 

Though  the  first  order  to  contract  could  not  be  com- 
pletely carried  out,  the  bank's  business  in  April,  1834, 
reached  a  lower  level  than  it  had  touched  since  1827,1  while 
the  total  reduction  from  August  1,  1833,  to  August  1,  1834, 
counting  discounts,  circulation,  deposits,  and  the  hoarding 
of  specie,  would  mean  a  reduction  of  accommodations  to  the 
community  in  one  year  to  an  incalculable  amount,  probably 
running,  however,  over  $25,000,000.  Since  the  state  banks 
had  to  contract  to  a  proportionate  degree,  the  suffering  occa- 
sioned by  the  decrease  of  banking  facilities  must  have  been 
extreme. 

The  contraction  of  1833-34  placed  the  bank  in  a  position 
of  great  strength,  a  result  evident  in  the  circumstance  that 
its  notes  were  not  only  undepreciated,  but  in  some  parts  of 
the  country  at  a  premium.2  Its  means,  too,  were  situated  so 
as  to  be  much  more  accessible  than  when  the  movement 
began,  having  been  transferred  to  a  considerable  extent  from 
the  West  to  the  East.  The  settlement  of  its  affairs  could 
thus  be  made  with  dispatch,  if  settlement  were  desired. 
The  amount  and  the  method  of  the  reduction  must  also  com- 

1  Had  the  attempt  at  reduction  been  completely  successful  in  the  time  given, 
the  total  loans  of  the  bank  on  April  1, 1834,  would  have  been  $47,000,000.    They  had 
not  been  so  low  since  1824,  when  they  were  $42,700,000.    The  following  table  gives  the 
aggregate  of  investments  in  discounts,  exchange,  and  funded  debt  of  the  United 
States,  in  millions,  for  April : 

1825  ....  $54.8  1830     -       -       -       -  $54.0 

1826  -       -       -       52.3  1831         -       -       -        59.2 

1827  -       -       -       -    50.8  1832     -  70.4 

1828  -       -       -       54.8  1833        ...        64.5 

1829  ----    57.9  1834     -       -       -       -    53.7 

A  comparison  of  the  business  done  in  the  months  of  contraction  with  the  same 
months  in  1832-33 and  1835  will  give  a  very  just  idea  of  the  reduction: 

DISCOUNTS  AND  DOMESTIC  EXCHANGE 

1832  1833  1834  1835 

Jan.  1  -       -       -       -....  $61.6  $54.9         $51.8 

April  1  -       -       -          ....  64.3  54.8           61.9 

Julyl  -       -       -       -     ....  63.3  51.0           65.1 

Sept.  1  -       -       -       $65.5  62.5  47.0 

Oct.  1  -       -       -       -     G3.6  60.0  46.0 

2  One  to  two  per  cent,  in  exchange  for  coin.— NILES,  Vol.  XLVI,  p.  86,  April  5, 1834 ; 
ibid.,  p.  169,  May  10;  ibid.,  p.  188,  quoting  the  Richmond  Whig  of  May  9. 


326  THE  SECOND  BANK  OF  THE  UNITED  STATES 

pel  the  conviction  that  the  bank  had  now  considerable  con- 
trol over  its  offices.  Few  of  these  failed  to  do  all  that  was 
demanded — in  the  West  and  Southwest  only  Louisville  and 
Natchez,1  in  the  South  only  Charleston.2  These  were  not 
matters  of  any  great  importance,  while  the  failure  at  the 
Atlantic  offices  was  of  no  importance  whatever.3 

While  the  bank  placed  itself  in  an  impregnable  position, 
che  country  suffered  bitterly.  In  September  Niles  says 
that  "  money  is  scarce,"  though  he  knows  no  reason  for  the 
scarcity.4  In  October  he  virtually  repeats  this  observation,5 
A  month  later  he  speaks  of  "a  most  severe  pressure  for 
money  "  and  the  probability  of  a  paralysis  in  business.6  In  the 
same  month  state-bank  notes  began  to  depreciate,7  and  loans 
were  at  18  per  cent,  per  annum.8  In  December  the  pressure 
had  increased,  and  laborers  were  being  discharged  because 
their  employers  could  not  procure  credit.9  In  January  fail- 
ures of  business  houses  and  banks  began  at  Philadelphia, 
New  York,  and  Washington.  At  the  end  of  the  same  month 
loans  in  New  York  and  Baltimore  could  be  had  only  at  from 
1^  to  3  per  cent,  discount  a  month.10  The  New  York  Com- 
mercial Advertiser  of  January  25, 1834,  declared  that  it  had 
"never  seen  so  deep  a  cloud  of  gloom  hanging  over  the 
exchange,"11  while  the  Boston  Courier  of  the  20th  said  that 
"  Saturday  was  the  most  tempestuous  day  on  'change  that 
we  have  yet  had.  The  gloom  was  absolutely  frightful. " 12 

Ordered  Oct.,  1833        Attained  July,  1831  Failure 

1  Louisville $682,743  $555,223  $127,519 

Natchez 562,081  486,230  75,850 

All  this  in  discounted  paper. 

2  Biddle  to  Johnson,  Jan.  30, 1834,  S.  D.  17,  23d  Cong.,  2d  Sess.,  p.  78. 

3  Yet  considerable  capital  at  the  western  branches  was  out  on  paper  which  had 
constantly  to  be  renewed.— President  of  Louisville  branch  to  Biddle,  Feb.  4,  1834, 
ibid.,  p.  110. 

*  NILES,  Vol.  XLV,  p.  17.  *  Ibid.,  p.  81.  *Ibid.,  p.  97. 

7  Louisiana  notes  5  per  cent,  discount  in  Baltimore ;  New  York  safety  fund  2  per 
cent.;  Alabama  and  Georgia  6  to  8  per  cent.— Ibid.,  p.  194,  Nov.  23, 1833. 

8  Ibid.,  p.  146.  9  Ibid.,  p.  265,  Dec.  21, 1833. 

10 Ibid.,  p.  389,  quoting  the  New  York  Commercial  Advertiser.  For  Baltimore, 
ibid.,  p.  346. 

"  Ibid.,  p.  389.  12  Ibid.,  p.  390. 


CONTRACTION  AND  PANIC  OF  1833-34        327 

The  failures  beginning  in  this  month  continued  unintermit- 
tently  until  June.1  Wages  went  down ;  notes  of  specie-paying 
state  banks  were  depreciated  at  from  1^  per  cent,  on  New 
England  notes  to  12  per  cent,  on  Alabama  notes ;  prices  fell; 
money  could  be  borrowed  only  at  from  12  to  18  per  cent, 
per  annum ;  state  loans  could  not  be  raised ;  workmen  were 
discharged  in  large  numbers;  real  estate  declined  in  value.2 
In  April  money  was  so  scarce  that  due  bills  had  to  be  given 
in  payment  by  many  persons,  while  loans  were  made  at  the 
rate  of  5  per  cent,  a  month.3 

The  height  of  the  distress  was  reached  in  May.  "  We 
have  never  seen  or  felt  anything  like  the  present  pressure," 
declared  Niles,  "  and  it  is  becoming  every  day  worse  and 
worse,"  *  Even  the  Globe,  which  had  hitherto  asserted  that 
there  was  no  distress,  or  very  little,  was  at  last  forced  to 
admit  the  situation.  "A  blasting  mildew,"  it  complained, 
"is  suddenly  brought  upon  the  business  concerns  of  the 
country,  and  a  prostration  of  trade  and  credit,  to  an  extent 
supposed  to  have  been  hitherto  unknown,  is  by  some  means 
effected." 5  After  this  month,  however,  the  distress  began 
to  diminish.  Even  so  early  as  May,  Benton  exultantly 
recited  a  catalogue  of  facts  supporting  the  presumption  that 
the  force  of  the  panic  was  broken.6  In  July  the  Bank  of 

1  Ibid.,  p.  309,  Jan,  4;  p.  375,  Jan.  25;  p.  390,  Feb.  1;  pp.  393,  396,  Feb.  8;  ibid., 
Vol.  XL VI,  p.  5,  March  1;  p.  65,  March  24;  p.  96,  April  13;  p.  113,  April  19;  p.  117,  May 
6 ;  p.  245,  June  7. 

2  For  details  see  i bid.  Vol.  XLV,  p.  331,  Jan.  11 ;  p.  345,  Jan.  18 ;  pp.  364, 373,  Jan. 
25;  p.  390,  Feb.  1 ;  p.  396,  Feb.  8;  p.  415,  Feb.  15;  p.  434,  Feb.  22. 

sibid.,  Vol.  XL VI,  pp.  86,  87.  *Ibid.,  p.  204,  May  24, 1834. 

fi/Md.,  p.  243,  quoting  the  Globe  of  May  24. 

6  "  Prices  of  property,  of  produce,  and  of  labor,  were  now  as  high,  in  general,  in 
some  cases  higher,  than  they  have  usually  been  heretofore.  The  great  staple  in  the 
South,  cotton,  was  now  a  cent  higher  in  the  pound,  at  New  Orleans,  than  it  was  at 
this  time  last  year.  The  domestic  exchanges,  which  had  been  deranged  for  a  while 
by  the  power  and  policy  of  the  Bank  of  the  United  States,  were  now  recovering,  and 
in  nearly  as  good  a  condition  as  ever.  The  notes  of  the  Virginia  banks,  though  pro- 
claimed in  this  city  to  be  ten  per  cent,  discount,  are  quoted  in  the  New  York  price 
currents  at  three  per  cent. ;  North  Carolina  and  other  Southern  notes,  at  from  three 
to  four ;  the  Louisiana  and  Mississippi  notes  at  five  per  cent. ;  and  these  are  the 
exact  rates  at  which  they  have  stood  in  that  market  in  those  happy  and  prosperous 


328  THE  SECOND  BANK  OP  THE  UNITED  STATES 

the  United  States  ceased  to  contract  to  a  very  considerable 
extent,  and  on  the  19th  of  that  month  money  was  noted  to 
be  "  more  plentiful  than  it  was." 1  The  stringency  was 
ended.  In  October  cash  was  a  drug  on  the  market, a  which 
was  sluggish  and  yielded  few  profitable  investments  —  the 
usual  consequents  of  a  panic. 

The  president  and  his  adherents  angrily  censured  the 
bank  for  the  distress.  At  first,  indeed,  the  administration 
supporters  declared  that  there  was  no  distress.  When  that 
assertion  could  no  longer  be  hazarded,  they  alleged  that 
most  of  the  evidence  of  distress  was  manufactured  by  the 
bank  or  its  partisans.3  This  was  true  to  the  extent  that  the 
bank's  advocates  made  as  much  noise  as  possible,  and  urged 
others  to  do  likewise.*  Several  volumes  of  government 
reports  are  filled  with  distress  petitions  and  memorials.5 
The  bank  in  answer  to  the  charges  retorted  wrathfully  that 
the  administration  alone  was  responsible  for  the  distress,  and 
it  solemnly  prefaced  every  movement  to  add  to  contraction  by 
calling  attention  to  the  sins  of  the  president.  Thus  on  the 
17th  of  October,  1833,  the  "  movements  of  the  executive 
officers  at  Washington  "  is  the  reason  alleged  for  further  cur- 
tailments;6 and  in  January  Biddle  declares  that  further  re- 
ductions are  necessitated  by  "the  new  measures  of  hostility 
understood  to  be  in  contemplation"  by  the  administration.7 

times  which  gentlemen  paint  in  such  glowing  colors." — C.  D.,  Vol.  X,  Part  II,  p.  1796, 
May  21, 1834. 

i  NILES,  Vol.  XLVI,  p.  346.  2  Ibid.,  Vol.  XLVII,  p.  113,  Oct.  25, 1834. 

3  Thirty  Years,  Vol.  I,  p.  421. 

*  "What  is  doing  in  your  Legislature  [Virginia]  about  the  deposits?  .... 
What  has  been  done  there  has  been  of  immense  service  to  us." — Clay  to  Francis 
Brooke,  Jan.  14, 1834,  CLAY'S  Correspondence,  p.  377.  "Our  city  is  full  of  distress 
committees.  The  more  the  better." — Same  to  same,  Feb.  10,  1834,  ibid.  Clay  to 
Biddle,  Dec.  21,  1833,  confidential,  B.  P.,  suggests  a  meeting  at  Philadelphia  to 
memorialize  Congress  for  the  return  of  the  deposits. 

$Ex.  Doc.,  Vols.  Ill,  IV,  V,  23d  Cong.,  1st  Sess.,  passim. 

6  Biddle  to  presidents  of  branches,  Oct.  17, 1833,  S.  D.  17,  23d  Cong.,  2d  Sess.,  p.  77. 

'  Ibid.,  pp.  80,  81,  83.  The  reference  was  to  the  apprehension  that  the  receipt  of 
branch  drafts  would  be  stopped.— Biddle  to  president  of  Charleston  branch,  Jan.  30, 
1834,  ibid.,  p.  79. 


CONTRACTION  AND  PANIC  OF  1833-34        329 

In  brief,  the  old  fable  still  applied.  The  wicked  administra- 
tion wolf  had  troubled  the  waters,  and  now  persisted  in  his 
sinful  purpose  of  dining  upon  the  innocent  bank  lamb.  Who 
was  right? 

The  enormous  reductions  made  by  the  bank  were  cer- 
tainly in  excess  of  any  possible  danger,  and  were  continued 
long  after  any  such  danger  threatened.  The  president  and 
company  of  the  Bank  of  the  United  States  were,  in  fact,  not 
only  frightened  by  Jackson's  attacks,  but  angry ;  not  merely 
angry,  but  vindictive,  and  vindictive  with  calculation.  They 
hoped  to  force  a  re -charter,  or  at  least  a  restoration  of  the 
deposits,  by  exercising  a  monetary  pressure  upon  the  coun- 
try. Not  only  does  the  degree  and  manner  of  reduction 
argue  this,  but  the  language  of  Biddle  and  his  friends  leads 
to  the  same  conclusion.  "  This  discipline,  it  appears  to  me," 
wrote  Webster,  "must  have  very  great  effects  on  the  general 
question  of  the  re-chartering  of  the  Bank."  l  Jaudon,  who 
went  to  Washington  to  look  after  the  bank's  interests  there, 
was  anxious  that  no  relief  should  be  given  which  could  be 
avoided:  "What  do  you  think  of  the  proposition  to  extend 
the  credit  on  Bonds  for  entries  ?  Would  it  not  give  too 
much  relief?"  he  queried.2 

Biddle,  for  his  part,  was  determined  that  no  misguided 
leniency  should  be  exercised,  no  relief  granted:  "On 
general  principles,  I  believe  that  if  the  Bank  were  to  suf- 
fer itself  to  be  misled  into  the  measure  of  making  money 
plenty,  it  will  only  give  to  its  enemies  the  triumph  of  having 
robbed  it  with  impunity,  and  only  confirm  what  those  ene- 
mies have  said  that  their  act  of  violence  would  be  attended 
with  no  inconvenience  to  the  public." 3  It  is  deducible  from 
these  remarks  that  the  bank  could,  if  it  chose,  make  "  money 
plenty,"  but  that  it  did  not  intend  to  allow  the  enemy  to 

1  Webster  to  Biddle,  Jan.  2, 1834,  B.  P. 

2  Jaudon  to  Biddle,  Washington,  Jan.  17, 1834,  ibid. 

3 Biddle  to  C.  A.  Davis  [Major  Jack  Downing],  of  New  York,  Jan.  21,  1834, 
P.  L.  B.,  Vol.  V,  p.  100. 


330  THE  SECOND  BANK  OF  THE  UNITED  STATES 

carry  out  his  schemes  without  "  inconvenience  to  the  public." 
A  temper  of  this  sort  was  viciously  unjust,  for  it  struck  at 
the  guilty  by  inflicting  penalties  upon  the  innocent;  and 
these  innocent  were  men  and  women  who  were  to  a  consider- 
able number  friends  and  partisans  of  the  bank.  Continued 
contraction,  consequently,  was  not  only  unjust,  but  impolitic 
to  the  last  degree.  Nevertheless  Biddle  was  determined  to 
abide  by  it.  A  week  later  he  wrote: 

The  ties  of  party  allegiance  can  only  be  broken  by  the  actual 
conviction,  of  existing  distress  in  the  community.  Nothing  but  the 
evidence  of  suffering  abroad  will  produce  any  effect  in  Congress. 
If  the  Bank  remains  strong  and  quiet,  the  force  of  events  will  save 
the  Bank  and  save  all  the  institutions  of  the  country  which  are  now 
in  great  peril.  But  if,  from  too  great  a  sensitiveness  —  from  the 
fear  of  offending  or  the  desire  of  conciliating,  the  Bank  permits 
itself  to  be  frightened  or  coaxed  into  any  relaxation  of  its  present 
measures,  the  relief  will  itself  be  cited  as  the  evidence  that  the 
measures  of  the  Govt  are  not  injurious  or  oppressive,  and  the  Bank 
will  inevitably  be  prostrated.  Our  only  safety  is  in  pursuing  a 
steady  course  of  firm  restriction — and  I  have  no  doubt  that  such  a 
course  will  ultimately  lead  to  a  restoration  of  the  currency  and  the 
recharter  of  the  Bank.  How  soon  this  will  take  place,  it  is  of  course 
difficult  to  conjecture — but  I  have  little  apprehension  as  to  the 
ultimate  result.1 

Determined  upon  his  course,  satisfied  that  in  the  end  the 
bank  would  win,  Biddle  could  not  be  swayed  from  his  pur- 
pose. He  was  encouraged  in  it  by  hundreds  of  friends  and 
correspondents,  and  above  all  by  speculators  in  bank  stock 
who  were  anxious  to  reap  a  harvest  from  the  commercial  dis- 
asters of  the  time  and  therefore  urged  a  continuance  of  the 
pressure.  If  you  want  a  charter,  "you  must  persevere. 
There  must  be  no  let-up,"  wrote  Webb,  and  he  complained 
that  the  New  York  market  was  getting  relief.2  On  the  other 
hand,  less  interested  men,  men  of  clearer  insight,  deprecated 
severe  measures.  Webster  urged  "  that  the  Bank  ought  to 

1  Biddle  to  Wm.  Appleton,  of  Boston,  Jan.  27, 1834,  P.  L.  B.,  Vol.  V,  p.  109. 
»  Webb  to  Biddle,  New  York,  Feb.  4  [1834],  B.  P. 


CONTRACTION  AND  PANIC  OF  1833-34        331 

reduce  as  slowly  and  moderately  as  they  can  —  and  occasion- 
ally to  ease  off  —  where  it  is  requisite  to  prevent  extreme  suf- 
fering." He  thought  that  the  administration  was  "  setting 
into  action  a  strong  sentiment  of  opposition  to  the  Bank,  on 
account  of  the  reductions." '  Biddle  appeared  irritated  by 
Webster's  opinions,  and  bluntly  disregarded  them.  The 
community  must  take  care  of  itself: 

My  own  course  is  decided  ....  all  the  other  Banks  and  all 
the  merchants  may  break,  but  the  Bank  of  the  United  States  shall 
not  break.  I  have  asked  Com*  Biddle  what  is  the  least  sail  under 
which  a  man  of  war  can  lie  to  in  a  gale  of  wind,  and  he  says  a  close 
reefed  main  topsail.  So  our  squadron  will  all  be  put  under  close 
reefed  main  topsails  and  ride  out  the  gale  for  the  next  two  years. 
As  for  those  who  have  no  sea  room  and  breakers  under  their  lee, 
they  must  rely  on  Providence  or  Amos  Kendall.2 

He  was  sure  that  a  re-charter  would  result.  It  might  be 
won  by  securing  a  temporary  act,  extending  the  present  char- 
ter for  three  years.  At  the  end  of  that  time  the  president 
would  be  out,  "  and  his  advisers  will  all  be  dispersed  among 
the  penitentiaries."  His  successor  would  either  be  favor- 
able, or,  if  it  were  Van  Buren,  too  timid  to  veto  a  bill.3 
"The  prospects  of  the  Bank  are,  I  think  very  favorable. 
The  state  of  the  country  is  so  bad,  and  goes  on  daily  worse 
that  I  do  not  see  how  things  can  hold  on  in  this  way  much 
longer.  Everybody  is  uneasy  and  anxious  and  Congress 
will  soon  be  obliged  to  act."  * 

It  seems  plain,  therefore,  that  Biddle  and  the  board  of 
directors  had  determined  to  exert  all  the  power  of  the  bank 
to  secure  a  new  charter,  and  that  they  believed  it  possible  to 
succeed  by  causing  panic  and  distress.  What  justification 
was  there  for  such  expectations?  The  story  of  the  panic 
session  of  1833-34  must  answer. 

1  H.  Binney,  at  the  instance  of  Webster,  to  Biddle,  Washington,  Feb.  4, 1834,  ibid. 

2  Biddle  to  Watmough,  Feb.  8, 1834,  P.  L.  B.t  Vol.  V,  p.  120. 

3  Biddle  to  Elihu  Chauncey,  Fob.  10, 1834,  ibid.,  p.  123. 
*To  John  McKim,  Jr.,  Feb.  10,  1834,  ibid.,  p.  125. 


CHAPTER  XIV 
THE  DEFEAT  OF  THE  BANK 

WHEN  Congress  met  in  December,  the  deposit  question 
immediately  came  before  it.  The  National  Republicans 
supposed  that  all  the  advantages  lay  with  them,  and  leveled 
their  assault  against  Jackson  along  three  lines :  that  he  had 
usurped  functions  not  granted  to  the  president  by  the 
constitution,  had  inflicted  suffering  upon  the  country,  and 
had  violated  the  contract  between  the  bank  and  the  govern- 
ment by  seizing  the  public  treasury  in  contravention  of  the 
charter.  The  party  issue  sought  to  be  made  was  that  the 
president  wished  to  secure  supremacy  over  Congress,  and 
hence  the  struggle  was  one  of  liberty  against  a  despot.  The 
Democrats,  though  for  the  moment  thrown  on  the  defensive, 
supported  the  president's  dismissal  of  his  secretary  as  con- 
stitutional and  the  removal  of  the  deposits  as  legal.  In 
these  points  they  were  undoubtedly  in  the  right.  Not  stop- 
ping here,  however,  they  boldly  assumed  the  offensive  and 
pressed  forward  to  an  attack  upon  the  bank,  insisting,  with 
endless  repetition,  that  the  real  struggle  was  not  between  the 
legislative  and  executive  departments,  but  between  the  presi- 
dent of  the  bank  and  the  president  of  the  United  States; 
that  the  issue  was  not  the  restoration  of  the  deposits,  but  a 
re-charter ;  that  the  bank  operated  a  gigantic  and  needless 
contraction,  and  therefore  that  it  and  not  the  president  was 
responsible  for  the  suffering  caused. 

The  Democrats  were  justly  fearful,  the  opposition  justly 
confident,  when  the  struggle  began.  So  hostile  was  popular 
feeling  to  the  president  in  Washington  itself  that  the  con- 

332 


DEFEAT  OP  THE  BANK  333 

elusion  of  Clay's  great  speech  "  was  followed  by  such  loud 
and  repeated  applause  from  the  immense  crowd  which 
thronged  the  galleries  and  the  lobbies  that  the  vice-presi- 
dent" had  the  galleries  cleared.1  In  January  Calhoun  wrote 
that  he  entertained  "  no  doubt  that  the  administration  will 
be  overthrown.  It  has  already  received  its  death  blow," 2 
and  he  was  equally  confident  in  February  .3  King,  of  Georgia, 
declared  that  the  great  majority  of  Jackson's  friends  dis- 
approved his  act  as  inexpedient,4  and  Preston,  of  South 
Carolina,  was  convinced  that  the  president's  action  had  done 
more  toward  securing  a  re-charter  than  anything  the  bank 
could  do.5 

Moreover,  the  National  Republicans  were  greatly  encour- 
aged by  receiving  the  assistance  of  the  Nullifiers  and  the 
State  Rights  party.8  Calhoun  spoke  strongly  for  the  bank ; 
Dr.  Cooper  wrote  in  its  interests;  Clayton,  of  Georgia, 
apologized  publicly  for  his  past  attacks  on  it;7  and  McDuffie 
was  a  staunch  supporter.  Yet  constitutional  scruples  stood 
in  the  way  of  a  permanent  union  between  them  and  the 
National  Republicans.  Calhoun,  indeed,  with  his  well- 
known  subtlety  of  constitutional  interpretation,  attempted  to 
demonstrate  that  the  bank  was  constitutional,  if  Congress 
had  the  right  to  regulate  the  paper  currency,  and  that  the 
continuance  of  the  bank  was  constitutional,  though  its  estab- 

1  C.  D.,  Vol.  X,  Part  I,  p.  94. 

2  Calhoun  to  Christopher  Van  Deventer,  Jan.  25,  1834,  Calhoun  Correspondence, 
Report  of  the  American  Historical  Association  (1899),  Vol.  II,  p.  329 ;  so  on  the  30th  to 
John  E.  Calhoun,  ibid.,  p.  331. 

3  Calhoun  to  James  E.  Calhoun,  Feb.  8,  ibid. 

*  C.  D.,  Vol.  X,  Part  I,  p.  847.  5  ibid.,  p.  563. 

6  "  We  find  sustaining  the  cause  of  the  bank  those  who  believe  a  protecting  tariff 
constitutional,  and  those  who  believe  it  unconstitutional;  those  who  believe  a 
system  of  internal  improvements  by  the  General  Government  constitutional,  and 
those  who  believe  it  unconstitutional ;  and,  most  astounding  of  all,  those  who  think 
a  Bank  of  the  United  States  constitutional,  and  those  who  believe  it  unconstitu- 
tional I  "—CLAY,  of  Alabama,  ibid.,  Part  III,  p.  3143. 

7  March  6,  in  the  House,  ibid.,  p.  2903. 


334  THE  SECOND  BANK  OP  THE  UNITED  STATES 

lishment  was  not.1  McDuffie  adopted  the  second  of  these 
arguments;2  Cooper  upheld  the  present  bank  because  he 
believed  that  the  president  was  intent  upon  chartering  one 
of  still  greater  power  and  much  more  objectionable  to 
constitutional  scruples;  other  State  Rights  politicians  de- 
clared that  the  constitutionality  of  the  question  depended 
upon  the  necessity  of  the  moment.  A  bank  was  "  necessary 
and  proper"  now,  though  it  might  not  be  so  next  week. 
These  arguments  are  only  too  evidently  the  product  of  the 
temper  and  passions  of  the  moment,  and  could  not  stand  the 
test  of  cooler  examination  and  criticism.  It  was  certain, 
therefore,  that  the  party  would  be  against  the  bank  in  the 
long  run,  and  that  dependence  upon  it  was  vain. 

There  was  also  a  number  of  congressmen  who  were 
willing  to  restore  the  deposits,  but  declared  themselves 
against  a  re-charter.3  These  were  generally  counted  upon 
by  the  bank,  but  illogically,  as  is  evident  from  the  vote 
on  the  resolution  of  the  Committee  of  Ways  and  Means 
that  the  bank  ought  not  to  be  re-chartered.  This  vote 
stood  134  to  82,  while  that  against  the  restoration  of  the 
deposits  was  only  118  to  103.  In  other  words,  there  was 

11.  If  Congress  has  the  right  to  receive  anything  but  specie  in  payment,  it 
has  the  right  to  regulate  its  value. 

2.  Hence,  if  bank  notes  are  received  in  payment,  it  has  the  right  to  regulate 
their  value. 

3.  So  the  banking  power  is  necessary  and  proper  under  the  constitution  if  notes 
are  received ;  hence  constitutional. 

4.  The  constitutional  question  is  not  upon  the  right  to  incorporate  a  bank,  but 
upon  the  right  to  receive  anything  but  specie  in  payment  of  dues. 

5.  An  act  done  may  be  constitutional  which  was   not   so  in  the  beginning. 
Louisiana  purchase,  for  example.    Act  of  madness  to  take  up  constitutional  ques- 
tion.   Same  reasoning  applies  to  the  bank. 

6.  Principle  applied  to  compromise  tariff  ought  to  apply  here.    That  act  was 
unconstitutional,  but  it  was  judged  better  to  pass  it  than  to  upset  everything  at 
once.    So  paper  currency.    State  Rights  party  ought  to  vote  for  his  bill  under  these 
circumstances.— In  Senate,  March  21, 1834,  C.  D.,  Vol.  X,  Part  I,  pp.  1070, 1071. 

2  Ibid.,  Partni,  p.  3469. 

3  Clayton,  of  Georgia,  ibid.,  p.  2903;  Bibb,  of  Kentucky,  ibid.,  Part  I,  p.  533;  Pinck- 
ney,  of  South  Carolina,  ibid.,  Part  III,  pp.  3087,  3088;  Clowney,  ibid.,  p.  2788;  Leigh, 
ibid.,  Part  I,  p.  996 ;  Archer,  of  Virginia,  ibid.,  Part  II,  p.  2629;  Gholson,  of  Virginia, 
ibid.,  Part  III,  p.  2941.    Almost  all  the  Virginians  were  in  this  category. 


DEFEAT  OF  THE  BANK  335 

about  a  score  of  votes  favorable  to  restoration  but  opposed 
to  re-charter.1 

On  the  18th  of  December,  1833,  the  bank  sent  a  memorial 
to  both  houses,  complaining  of  the  violation  of  its  charter 
by  the  removal  of  the  deposits,  and  praying  for  justice  at 
the  hands  of  Congress.2  On  the  last  days  of  December 
Clay  opened  the  campaign  against  Jackson  in  a  three-days' 
speech,  in  which  he  outlined  the  policy  of  the  National 
Republicans.  His  tactics  were  faulty,  however,  in  that  he 
proposed  no  effective  remedy  for  the  situation.  Resolutions 
passed  by  the  Senate  alone,  censuring  the  president  and  the 
secretary  of  the  treasury  for  committing  an  illegal  and 
unjustifiable  act  in  removing  the  deposits,  might  irritate  and 
enrage  Jackson,  but  could  have  no  other  effect.3  Undoubt- 
edly the  real  object  was  to  give  time  to  let  the  panic  work, 
since  panics  are  powerful  engines  in  party  warfare. 

Clay's  speech  and  resolutions  opened  the  flood-gates  of 
debate  in  the  Senate,  while  the  bank's  partisans  buried 
Congress  under  huge  piles  of  memorials  praying  for  relief. 
Such  was  the  strategy  of  Clay.  Thousands  of  memorials 
came  in,  while  Webster  for  the  bank,  Forsyth  for  the  ad- 
ministration, spoke  over  seventy  times,  and  Clay  over  sixty 
times.  Other  incitements  to  debate  were  constantly  added. 
Every  memorial  produced  a  speech,  and  sometimes  a  dozen, 
while  on  February  5  a  new  source  of  discussion  was  fur- 
nished by  Webster's  report  from  the  Finance  Committee, 
declaring  Taney's  reasons  for  removing  the  deposits  insuffi- 
cient, and  recommending  the  adoption  of  Clay's  second  reso- 
lution censuring  the  president.* 

iThe  legislature  of  Virginia  expressed  this  policy  in  its  resolutions  against 
Jackson's  removal  of  the  deposits,  though  at  the  same  time  refusing  its  sanction  to 
the  Bank  of  the  United  States  on  constitutional  grounds.— Ibid.,  Part  III,  p.  2840, 
resolutions  presented  March  3, 1834. 

2 Ibid.,  Part  II,  p.  2207. 

3  See  BENTON'S  criticism,  Thirty  Years,  Vol.  I,  pp.  393-6. 

*  C.  D.,  Vol.  X,  Part  I,  p.  467. 


336   THE  SECOND  BANK  OF  THE  UNITED  STATES 

Clay's  plan  of  campaign,  however,  was  by  no  means 
satisfactory  to  those  who  wished  success  to  the  bank.  The 
true  policy,  so  far  as  it  was  concerned,  would  have  been  to 
introduce  a  joint  resolution  for  the  restoration  of  the  depos- 
its, which  should  have  been  thoroughly  discussed  and  quickly 
passed.  Biddle  himself  urged  that  the  Senate  should  pass 
joint  resolutions  to  this  effect  as  soon  as  possible,  "then  send 
the  resolutions  down  to  the  House,  and  trust  to  external 
pressure  to  do  the  rest."  1  But  as  in  1832  Biddle  had  cared 
"nothing  for  the  campaign,"  so  in  1833  Henry  Clay  cared 
little  or  nothing  for  the  bank.  Webster  and  Calhoun  soon 
exhibited  discontent  with  Clay's  maneuvers,  broke  away 
from  his  leadership,  and  supported  measures  involving  effect- 
ive action.  Webster  wished  to  re-charter  the  bank  for  six 
years,  Calhoun  for  twelve,  and  the  two  could  not  compro- 
mise their  differences.2  The  bank's  representatives  were  as 
much  at  variance  as  the  senators.  While  Biddle  approved 
Webster's  plan,3  Sergeant  and  Binney  supported  Calhoun's, 
wished  him  to  "take  the  direction  in  chief,"  objected  to 
"  compromising  for  a  short  continuance  of  the  charter,"  and 
urged  Biddle  to  help  to  "alter  the  feelings  of  our  friend  W., 
and  reconcile  him  to  a  new  course."  *  Webster  himself  was 
confident  that  his  scheme  might  succeed.  "If  Mr.  C.  and 
Mr.  C.  would  go  along  with  us,"  he  wrote,  "we  could  carry 
the  compromise  Bill  through  the  Senate  by  a  strong  two- 
thirds  majority.  Can  you  write  through  any  body  to  talk 
with  Mr.  Calhoun  ?  " b  He  had  assurances  from  friends  of  the 

1  To  H.  Binney,  who  was  to  give  this  advice  to  Webster,  Jan.  8, 1834,  P.  L.  B.t 
Vol.  V,  p.  85. 

2  The  South  Carolina  statesman  objected  to  Webster's  scheme  that,  if  it  really 
meant  a  re-charter,  the  time  was  too  short ;  if  it  was  simply  intended  to  give  the  bank 
time  to  wind  up  its  affairs,  the  period  was  too  long.    It  would  inject  the  bank  issue 
into  two  more  presidential  campaigns,  and  it  settled  nothing.—  C.  D.,  Vol.  X,  Part 
I,  p.  1057,  March  21. 

3  Biddle  to  Webster,  Feb.  13,  1834,  P.  L.  B.,  Vol.  V,  p.  130 ;  and  same  to  same, 
March  15, 1834,  ibid.,  p.  163. 

*  Sergeant  to  Biddle,  Feb.  17, 1834,  B.  P.  5  Webster  to  Biddle  (undated) ,  ibid. 


DEFEAT  OF  THE  BANK  337 

president  that  they  would  support  his  measure  "  if  all  the 
friends  of  the  Bank  stood  firm." '  King,  of  Georgia,  an- 
nounced in  the  Senate  a  willingness  to  support  him,  though 
he  was  unfriendly  to  the  bank.2  Jaudon  thought  that  Web- 
ster's plan  was  the  better  and  would  be  easier  to  carry,  and 
that  Clay  would  give  his  support  to  either  bill.  "  But  Mr. 
Webster  and  Mr.  Calhoun  are  obstinately  wedded  each  to 
his  own  plan!"3  Two  days  later  he  discovered  that  Clay 
wished  all  action  deferred  until  May,  and  would  not  vote  for 
Webster's  bill,  though  he  would  support  a  long-term  bill.4 
Calhoun  attempted  to  secure  the  support  of  Wright,  Benton, 
and  their  friends  for  his  measure,  but  without  success.5  He 
was  not  confident  that  his  bill  could  be  carried,  but  declared 
that  if  anything  was  done  it  would  be  in  accordance  with 
his  suggestions.6  Biddle  thought  that  the  bank  ought  to 
"  go  for  the  practical.  If  we  can  get  a  permanent  charter, 
let  us  do  so  —  if  not,  let  us  take  the  temporary  and  make  it 
permanent  hereafter."  7  Calhoun's  plan  would  be  "the  basis 
of  the  final  settlement,"  but  meanwhile  the  friends  of  the 
bank  ought  to  act  in  unison,  and  he  hoped  that  they  would.8 
His  hopes  were  doomed  to  disappointment,  however,  for  the 
leaders  could  not  agree,  and  complete  lack  of  harmony  was 
necessarily  fatal.9  On  the  18th  of  March  Webster  outlined 
his  bill;10  on  the  21st  Calhoun  objected  to  it  and  presented 

i  Thirty  Years,  Vol.  I,  p.  433.  2  c.  D.,  Vol.  X,  Part  I,  p.  849. 

3  Jaudon  to  Biddle,  March  9, 1834,  B.  P. 

*Same  to  same,  March  11,  ibid.  5  Thirty  Years,  Vol.  I,  p.  435. 

6 "It  is  very  uncertain,  what  will  be  done;  but  if  anything  should  be,  it  will  be, 
I  feel  confident,  in  conformity  with  the  suggestions,  I  made  on  Mr.  Webster's  motion, 
which  have  been  well  received  on  all  sides." — To  Anna  M.  Calhoun,  April  3, 1834,  Cal- 
houn Correspondence,  p.  334. 

7  Biddle  to  Jaudon,  March  11, 1834,  P.  L.  B.,  Vol.  V,  p.  161. 

«  Biddle  to  Thomas  Cooper,  April  8, 1834,  ibid.,  p.  177. 

9  Benton  expresses  surprise  at  the  failure  to  unite,  and  declares  that  Webster's 
plan  was  the  only  one  which  stood  any  chance  of  success.— Thirty  Years,  Vol.  I, 
pp.  433,  435. 

10  C.  D.,  Vol.  X,  Part  I,  p.  995.    Webster's  bill  is  given  in  extenso  on  pp.  1004, 1005. 

"What  the  bill  proposed,  was  — 

"  A  short  continuance  of  the  present  charter,  with  an  addition  of  its  exclusive 


338  THE  SECOND  BANK  OF  THE  UNITED  STATES 

his  own  measure.1  Clay  remained  silent,  but  he  refused  to 
support  either  plan,  and  was  so  incensed  with  Webster's  that 
in  private  he  demanded  that  the  Massachusetts  senator 
should  move  to  lay  it  on  the  table,  threatening  that  if  he  did 
not  he  himself  would  make  the  motion,  whatever  the  conse- 
quences.2 It  is  plain  that  Clay  had  determined  that  none 
but  he  should  lead.  On  the  25th  of  March  Webster  capitu- 
lated, making  the  motion  to  lay  the  bill  on  the  table,  declar- 
ing, however,  that  he  would  call  it  up  again  "  about  the  first 
of  May." 3  This  was  virtually  the  end  of  it,  though  Webster 
gravely  and  emphatically  declared  on  the  21st  of  May  that 
his  plan  was  not  abandoned.4  Abandoned  or  not,  there  was 
no  further  hope  for  the  project,  and  Calhoun's  scheme  was 
equally  futile. 

The  action  on  the  bills  was  the  critical  stage  of  the  strug- 
gle for  the  bank.  For  some  weeks  previously  it  had  been 
steadily  losing  friends.  Biddle  had  been  warned  by  one  of 
his  correspondents  in  February  that  this  result  was  prob- 
able. The  populace,  urged  this  keen-sighted  politician, 
would  understand  only  a  clear,  easy  argument,  and  the 

right ;  so  that,  while  this  bank  continued,  Congress,  at  its  leisure,  might  provide 
another,  if  it  chose,  and  bring  it  into  existence  to  take  the  place  of  this,  at  the  end  of 
six  years ;...." 

There  was  to  be  a  restoration  of  the  deposits ;  and  a  provision  for  enlarging  the 
specie  circulation,  so  as  to  increase  in  fact  to  a  great  extent  the  hard  money  of  the 
country  and  to  discontinue  the  circulation  of  small  notes.  "This  is  the  substance 
of  the  measure." 

Thus,  said  Webster,  "  the  country  will  be  relieved  "  and  "  the  Bank  will  have 
time  to  collect  its  debts  and  wind  up  its  concerns."— C.  D.,  Vol.  X,  Part  II,  p.  1763. 

1  Calhoun's  plan :    (1)  Must  use  a  bank  to  unbank  the  banks ;  i.  e.,  the  big  bank 
must  be  continued  to  control    the  small  ones.     (2)  The  bank  to  be  a  new  one 
engrafted  on  the  old.    (3)  This  bank  to  be  chartered  for  twelve  years;  not  to  issue 
notes  smaller  than  $10;  no  notes  of  any  bank  under  the  denomination  of  $5  to  be 
received  either  by  the  government  or  the  bank ;  at  the  end  of  six  years  bank  to  issue 
no  notes  smaller  than  $20;  then  government  and  bank  not  to  receive  notes  of  smaller 
size.    (4)  Twelve  years  best  to  let  agitation  subside,  and  fix  upon  best  plan  of  future 
bank.    (5)  Other  details  to  be  arranged  later,  but  rate  of  interest  to  be  5  per  cent.— 
Ibid.,  Part  I,  pp.  1067, 1068,  March  21, 1834. 

2  "  If  Webster  refuses,  Clay  says  he  will  move  to  lay  it  on  the  table  at  all  haz- 
zards  and  abide  the  consequences."— J.  W.  Webb  to  Biddle,  Washington,  March  23, 
1834,  B.  P. 

3  C.  D.,  Vol.  X,  Part  I,  p.  1145.  *Ibid.,  Part  II,  p.  1791. 


DEFEAT  OF  THE  BANK  339 

bank's  arguments  were  always  involved  and  hard  of  compre- 
hension; pressure  should  indeed  be  exercised  after  the 
removal  of  the  deposits  to  show  that  the  administration  had 
caused  it,  but  if  pressure  went  so  far  as  to  ruin  merchants, 
it  would  alienate  that  class  and  convince  the  people  that  the 
bank  was  at  fault ;  if  it  was  continued  while  all  around  fail- 
ures were  daily  occurring,  the  people  would  be  persuaded 
that  the  bank  was  too  powerful  and  therefore  dangerous, 
and  would  insist  upon  its  destruction.  The  time  had  come 
for  a  change  of  policy.1  The  St.  Louis  Republican  of  Feb- 
ruary 10,  while  asserting  its  continued  friendship  for  the 
institution,  criticised  its  action  severely.2  Even  Niles 
admitted  that  the  bank's  ability  to  protect  itself  proved 
that  its  power  was  too  great,3  and  a  little  later  held  that 
it  was  "  conclusive  evidence  "  of  the  bank's  excessive  power, 
"  which  power,  .  .  .  .  I  would  not  agree  to  continue"  4 
Nevertheless  the  directors  could  not  be  convinced  and  would 
not  yield.  "The  relief,"  doggedly  persisted  Biddle,  "to  be 
useful  or  permanent,  must  come  from  Congress  and  from 
Congress  alone.  If  that  body  will  do  its  duty,  relief  will 
come  —  if  not,  the  Bank  feels  no  vocation  to  redress  the 
wrongs  inflicted  by  these  miserable  people.  Rely  upon  that. 
This  worthy  President  thinks  that  because  he  has  scalped 
Indians  and  imprisoned  Judges,  he  is  to  have  his  way  with 
the  Bank.  He  is  mistaken."  5 

Later  in  the  month,  however,  came  a  crushing  reminder 
of  the  fallibility  of  bank  presidents  and  of  the  transitoriness 
of  the  power  of  banks.  Governor  Wolf  of  Pennsylvania 
denounced  the  corporation  in  his  message,  thus  severely  crip- 

1  S.  M.  Stilwell  to  Biddle,  New  York,  Feb.  16  and  19, 1834,  B.  P. 

2  "  We  have  been,  and  still  are,  the  fast  friends  of  this  institution.    But,  when 
we  see  it  adopting  a  course  fraught  with  distress  and  ruin  to  our  community,  we 
shall  not  hesitate  to  condemn  it." — St.  Louis  Republican,  Feb.  10,  1834,  C.  £>.,  Vol. 
X,  Part  III,  p.  3157. 

3  NILES,  Vol.  XLV,  p.  363,  Jan.  25, 1834.        *  Ibid.,  Vol.  XLVI,  p.  20,  March  8, 1834. 
5  To  Joseph  Hopkinson,  Feb.  21, 1834,  P.  L.  B.,  Vol.  V,  p.  138. 


340  THE  SECOND  BANK  OP  THE  UNITED  STATES 

pling  it  by  influencing  public  opinion  against  it.1  Since  Wolf 
had  hitherto  been  a  bank  supporter,  his  attitude  was  fatal. 
The  whole  Democratic  party  in  Pennsylvania  faced  about 
immediately.  The  senate  of  that  state  passed  resolutions 
against  the  bank;2  both  Pennsylvania  senators,  who  had 
supported  the  re-charter,  now  opposed  the  institution ;  Inger- 
soll,  who  had  toiled  energetically  for  the  bank  in  1832, 
Sutherland,  who  had  led  the  Pennsylvania  forces  in  the 
House  on  that  occasion,  Rush,  who  was  an  old  supporter  — 
all  were  now  in  opposition,  and  the  bank  scarcely  numbered 
an  advocate  among  the  Pennsylvania  delegation  in  Congress.3 
Forsaken  by  its  own  state,  its  cause  was  doomed.  Every- 
one recognized  this,4  and  it  was  only  emphasized  by  the 
assurance  that  the  governor's  opposition  was  not  to  a  bank, 
but  to  the  bank,  being  caused  by  the  recent  operations  of 
the  corporation.5  The  lead  of  Pennsylvania's  governor  was 

1  Message,  NILES,  Vol.  XL VI,  pp.  26,  27. 

2  "  Resolved,  That  the  present  bank  of  the  United  States  ought  not  to  be  chartered 
by  congress. 

"  Resolved,  That  the  government  deposites  which  have  been  withdrawn  from  the 
bank  of  the  United  States  ought  not  to  be  restored."  Vote  for  first,  19-13 ;  second, 
18-14.—  Ibid.,  p.  85,  March  21, 1834. 

3  See  a  very  good  r6sum6  of  the  situation  in  ABISTIDES  (T.  L.  McEenney), 
Essay  on  the  Spirit  of  Jacksonism,  pp.  128-34. 

*  "Mr.  President,  when  the  Governor's  unexpected  message  arrived  here,  it  was 
felt  by  all  parties  that  he  had  thrown  his  great  weight  into  the  scale  of  the  Presi- 
dent. It  was  blazoned  forth  by  the  administration  party  and  prints,  that  the  Gov- 
ernor had  come  out  in  favor  of  the  removal  of  the  deposites,  and  against  the  bank._ 
It  was  felt  here,  as  the  Senator  from  Georgia  expressed  it,  as  a  damper." — CLAY, 
April  29, 1834,  C.  D.,  Vol.  X,  Part  II,  p.  1546. 

"  On  the  memorable  26th  of  February  last,  all  eyes  were  turned  towards  Harris- 
burg It  was  evident,  that  in  this  political  warfare  Pennsylvania  was  viewed 

as  the  '  Belgium '  of  the  continent,  and  that  the  battle  of  '  Waterloo '  was  to  be 
fought  at  the  seat  of  Government.  Everj  effort  was  exerted  to  procure  an  expres- 
sion favorable  to  the  renewal  of  the  charter,  and  a  restoration  of  the  deposites ;  but 
the  course  of  policy  which  had  marked  the  directory  of  that  institution  for  somo 
time  previous,  had  sealed  its  condemnation  with  the  Executive,  Legislature,  and  a  vast 
portion  of  the  people  of  Pennsylvania."— WILKINS,  April  29, 1834,  ibid.,  pp.  1543, 1544. 

5"  He  stated,  as  a  matter  of  his  own  knowledge,  that  Governor  Wolf  was  then, 
and  is  now,  in  favor  of  a  national  bank,  and  he  believes  the  fiscal  concerns  of  the 
Government  cannot  get  along  without  it.  He  does  think,  however,  that  recent 
developments  in  relation  to  the  management  of  that  institution,  are  sufficient  to 
create  doubts  as  to  its  influence  upon  the  public  morals." —  McKEAN,  Senate,  April 
25, 1834,  ibid.,  p.  1486. 


DEFEAT  OP  THE  BANK  341 

one  month  later  followed  in  New  York  by  Governor  Marcy, 
who  did  much  to  break  the  force  of  the  financial  pres- 
sure by  advising  the  issue  of  four  or  five  million  dollars 
of  state  stock  to  be  loaned  to  the  state  banks,1  whereupon 
the  legislature  passed  a  bill  creating  $6,000,000  of  5  per 
cent,  stock  for  this  purpose.2 

Almost  immediately  afterward  the  House  of  Representa- 
tives put  the  quietus  to  the  bank's  hope  of  securing  either  a 
restoration  of  the  deposits  or  a  re-charter.  The  debate  there 
centered  about  the  same  questions  as  were  discussed  in  the 
Senate.  The  tactics  of  Polk,  who  led  the  Democrats,  were 
to  secure  a  reference  of  the  various  documents  and  memo- 
rials to  the  Committee  of  Ways  and  Means,  of  which  he  was 
chairman.  In  this  he  succeeded,3  and  when  he  had  done  so, 
the  bank  was  beaten.  On  April  4  the  committee  reported, 
and  the  House  adopted  its  findings.  It  was  resolved  that 
"  the  bank  of  the  United  States  ought  not  to  be  re-chartered," 
134  to  82;  "  that  the  public  deposites  ought  not  to  be 
restored,"  118  to  103;  "that  the  state  banks  ought  to  be 
continued  as  the  places  of  deposite,"  117  to  105;  and  that  a 
select  committee  should  be  named  to  examine  the  bank's 
affairs  and  investigate  the  reasons  for  the  commercial  crisis, 
175  to  42.'  The  friends  of  the  bank  were  furious;  "  The  his- 
tory of  this  day,"  wrote  one  of  them,  "  should  be  blotted 
from  the  annals  of  the  Republic;  for  the  heart  of  every 
Patriot  must  sicken,  at  the  recital  of  the  events  which  it  will 
record.  The  Chief  Magistrate  of  the  United  States  seized 

1  Message  of  March  23, 1834,  NILES,  Vol.  XL VI,  p.  96. 

2  By  a  vote  of  89  to  12  in  the  house,  17  to  4  in  the  senate. — April  2,  ibid.,  pp.  Ill, 
112, 114.    This  loan  was  known  as  the  Marcy  mortgage.—  HAMMOND,  History  of  New 
York,  Vol.  II,  p.  441. 

3  McDuffie's  motion  for  referring  to  Committee  of  the  Whole,  Dec.  10, 1833,  C.  £>., 
Vol.  X,  Part  II,  p.  2166;  Folk's  motion  for  reconsideration,  Dec.  11,  p.  2170;   motion 
to  reconsider  carried,  Dec.  17,  p.  2207,  vote,  124  to  102;  motion  to  commit  to  Ways  and 
Means  Committee  by  Polk,  ibid. ;  Folk's  motion  carried,  Feb.  18, 131  to  98.— Ibid.,  pp. 
2739,  2740. 

*Ibid.,  Part  III,  pp.  3474-7. 


342  THE  SECOND  BANK  OF  THE  UNITED  STATES 

the  Public  Treasure,  in  violation  of  the  law  of  the  land ;  and 
the  Representatives  of  the  People  have  confirmed  the  deed ! ! ! 
What  American  ever  expected  to  have  lived  to  see  such 
turpitude  ? "  J  In  accordance  with  the  last  resolution  of 
April  4,  the  House  appointed  a  committee  with  the  most 
extensive  powers.2  It  was  to  pry  into  the  accounts  of  indi- 
viduals with  the  bank,  and  even  into  the  private  correspond- 
ence of  congressmen  with  it;3  and  would,  as  a  matter  of 
course,  return  a  hostile  and  damaging  report.  The  bank's 
patience  was  exhausted;  the  president  had  done  his  worst; 
the  institution  had  everything  to  lose  and  nothing  to  gain 
by  permitting  such  an  exhaustive  and  vexatious  investiga- 
tion ;  above  all,  Biddle  was  resolved  not  to  suffer  the  exami- 
nation of  private  accounts,  and  particularly  of  the  letters  of 
congressmen.4  The  bank,  therefore,  put  as  many  obstacles 
as  possible  in  the  way  of  the  committee,  ending  by  refusing 
to  allow  the  examination  of  its  books,  except  under  condi- 
tions to  which  the  committee  would  not  assent.5  The 
majority  thereupon  reported  warmly  to  the  House,  conclud- 
ing with  the  demand  that  Biddle  and  his  fellow-directors 
should  be  arrested  and  brought  to  the  bar.6  The  matter  was 
suffered  to  end  here,  however,  and  no  more  committees  were 
appointed  by  the  representatives. 

i  John  Connell  to  Biddle,  Washington,  April  4, 1834,  B.  P.  A  week  later  Niles 
wrote  despondingly  of  the  situation,  and  pointed  out  the  real  secret  of  the  defeat. 
"  It  is  a  great  misfortune  that  the  question  as  to  a  restoration  of  the  public  deposits 
was  suffered  to  run  into  that  concerning  a  renewal  of  the  charter  of  the  present 
bank  of  the  United  States.  It  was  not  the  will  of  the  friends  of  a  national  bank 
that  it  should  have  been  so ;  but  the  other  party,  in  pursuit  of  its  original  design  to 
destroy  the  present  bank,  ....  forced  the  connexion,  and  the  removal  of  the  depos- 
ites,  by  the  president  rallied  this  party,  and  pushed  it  into  action  against  the  cur- 
rency of  the  country."— NILES,  Vol.  XL VI,  p.  98,  editorial  of  April  12, 1834. 

a  C.  D.,  Vol.  X,  Part  III,  p.  3476,  resolution  4. 

3 "  Resolved,  That  the  president  and  directors  of  the  bank  be  requested  to 
furnish  the  committee  with  copies  of  all  correspondence  between  the  president  of 
the  bank  or  any  of  its  officers,  with  members  of  Congress ;  or  of  unanswered  letters 
received  from  one  of  them  since  the  1st  day  of  July,  1832,  touching  the  renewal  of  the 
charter  of  the  bank,  the  removal  or  restoration  of  the  public  deposites,  or  touching 
the  business  transactions  of  such  members  with  the  bank." — NILES,  Vol.  XL VI,  p.  188. 

*  To  John  Bell,  May  2, 1834,  P.  L.  B.,  Vol.  V,  p.  187. 

5  H.  R.  481,  23d  Cong.,  1st  Sess.,  pp.  1&-29.  6  75^.,  p.  13. 


DEFEAT  OF  THE  BANK  343 

Meanwhile  a  movement  out-of-doors  had  ended  in  the 
partial  abandonment  of  the  bank's  restrictive  policy.  Pres- 
sure had  early  been  brought  to  bear  upon  the  bank  for  the 
purpose  of  securing  a  change  in  its  operations,  and  was  ex- 
erted particularly  by  business  men  who  were  friends  of  the 
bank,  saw  ruin  approaching,  solicited  accommodations  inces- 
santly, and  soon  began  to  assert  that  the  directors  were  acting 
flagitiously  in  their  restriction.  The  pressure  was  especially 
intense  in  New  York,  and  in  February  the  banks  and  mer- 
chants of  that  city  selected  a  union  committee  which  should 
interview  the  management  of  the  Bank  of  the  United  States 
and  attempt  to  arrange  a  suspension  of  the  contraction. 
The  directors  were  much  embarrassed  by  their  propositions, 
and  attempted  to  avoid  acceding  to  them.  On  February  28 
Biddle  declared  that  the  bank  would  have  granted  relief  had 
it  not  been  for  Governor  Wolf's  attack.1  Put  bluntly,  this 
meant  that  New  York  was  to  suffer  because  the  governor  of 
Pennsylvania  abused  the  bank.  The  union  committee  did 
not  despair,  however,  and  it  soon  became  evident  that  the 
bank  must  yield  or  reap  a  ruinous  unpopularity  among  its 
New  York  supporters.  James  G.  King  assured  Biddle  that 
"the  reasons  assigned"  for  refusal  "would  not  be  deemed 
sufficient  by  our  community,  for  a  longer  postponement," 
and  that  if  relief  were  not  granted  New  York  would  prob- 
ably establish  a  Regency  Bank.2  Gallatin  and  other  mem- 
bers of  the  union  committee  believed  that  the  bank  was 
strong  enough  to  give  assistance,  and  that  it  ought  to  do  so 
— opinions  which  they  were  determined  to  express  in  a  pub- 
lic report  to  the  merchants  and  bankers  whom  they  repre- 
sented. "Hence  the  Bank  had  to  do  something,  for  the 
evil  of  such  an  announcement  would  have  been  enormous." ' 
Finally  on  March  23  King's  warning  seemed  about  to  take 

1  Biddle  to  J.  G.  King,  of  the  committee,  Feb.  28, 1834,  P.  L.  B.,  Vol.  V,  p.  145. 

2  King  to  Biddle,  March  11, 1834,  B.  P. 

3  Biddle  to  Watmough,  March  17, 1834,  P.  L.  B.,  Vol.  V,  p.  164. 


344  THE  SECOND  BANK  OF  THE  UNITED  STATES 

shape,  when  Marcy  recommended  the  loan  to  the  banks. 
The  directors  therefore  agreed  that  there  should  be  no  fur- 
ther diminution  in  its  business  "up  to  the  first  of  May 
next."1 

When  this  decision  was  made  the  bank's  cause  was  ruined 
in  the  opinion  of  most  men.  It  was  said  at  once  that  the 
contraction  had  been  inexcusable  or  else  the  relief  was  so; 
either  the  bank  could  have  rendered  assistance  earlier  or  it 
could  not  render  it  now.  Struggle  as  they  might  against 
this  charge,  the  managers  could  neither  refute  it  nor  return 
to  the  original  policy  with  any  chance  of  success.  The  relax- 
ation was  certain  to  be  permanent.  The  exasperated  direc- 
tors, enraged  by  the  act  of  the  House  of  the  4th  of  April, 
petulantly  but  vainly  warned  the  nation  that  it  had  no  right 
to  expect  further  favors.  Previous  to  the  1st  of  October, 
1833,  the  bank  had  been  "  responsible  for  the  general  con- 
dition of  the  currency  and  the  exchanges."  It  had  under- 
gone "years  of  effort  and  sacrifice"  to  bring  "the  currency 
and  the  exchanges"  to  a  condition  superior  to  that  which 
existed  in  any  other  country.  It  had  also  had  upon  its 
shoulders  "the  duty  of  averting  every  calamity."  Right 
nobly  had  it  fulfilled  this  obligation:  witness  the  panic  of 
1825;  witness  the  extension  of  loans  in  1831;  witness  the 
defraying  of  the  cost  of  the  postponement  of  the  payment  of 
the  3  per  cents,  in  1832;  witness  its  self-sacrificing  action 
in  the  presence  of  the  cholera.  But  now  this  obligation  had 
forever  ceased.  The  bank  would  hereafter  attend  to  its  own 
business,  and  it  was  not  to  blame  if  disaster  overtook  the 
country.2 

The  effect  of  the  bank's  concessions  upon  one  wing  of 
its  supporters  is  vividly  portrayed  by  a  letter  of  James  Wat- 
son Webb  to  a  friend.  Webb  had  constantly  urged  Biddle 

i  Report  of  the  Union  Committee,  March  29, 1834,  NILES,  Vol.  XL VI,  p.  73. 
2fif.  D.  17,  23d  Cong.,  2d  Sess.,  p.  100. 


DEFEAT  OP  THE  BANK  345 

to  persist,  and  not  to  waver  in  his  policy,  with  the  assurance 
that  continued  severity  was  certain  to  secure  a  charter.  He 
had  also  requested  Biddle  to  let  him  know  the  moment  any 
change  in  policy  was  contemplated.  The  motives  underlying 
all  this  zeal  became  apparent  in  his  letter.  He  had  been 
speculating  in  the  stock  of  the  bank.  When  the  news  of 
the  concessions  to  the  committee  reached  him,  he  uttered  a 
wail  of  mingled  reproach  and  despair.  "The  truth  is,  that 
our  friend  Biddle,  by  loaning  himself  most  unadvisedly  to 
the  Union  Committee  of  N  Y,  has  ruined  most  of  us 

in  New  York  and  dispirited  the  others Hamilton  * 

and  myself  lose  about  $3,000,  and  Joseph  and  myself  $11,- 
500!  This  takes  my  all,  except  my  interest  in  the  paper, 
but  I  do  not  complain  of  Biddle." 2 

Some  gleams  of  hope  were  shed  by  the  spring  elections 
of  1834.  Rhode  Island  was  against  the  administration;8 
the  New  York  local  elections  were  favorable  to  the  Whigs;4 
the  ward  elections  in  Philadelphia  were  anti-administration ; 5 
Jackson's  opponents  carried  the  Virginia  legislature  by  a 
large  majority,6  and  Louisiana  followed  Virginia's  example.7 
These  elections,  however,  lacked  the  significance  which  the 
bank  and  its  friends  persisted  in  seeing  in  them.  Virginia 
rebuked  Jackson,  but  would  not  support  a  bank.  The  New 
York  elections  were  the  utterance  of  voters  who  hardly  knew 
what  to  do  in  circumstances  of  great  distress  and  aimed  a 
blow  at  the  only  head  that  could  be  struck.  Louisiana  had 
always  been  a  tariff  state,  and  Rhode  Island  had  certainly 
not  been  a  Jackson  stronghold. 

Clay,  too,  had  won  a  victory  in  the  Senate,  the  censure  of 
the  president  having  been  voted  by  26  yeas  to  20  nays.8 

i  Presumably  Alexander  Hamilton,  Jr.  2  Webb  to ,  March  23, 1834,  B,  P. 

s  SENATOR  BOBBINS,  April  24, 1834,  C.  D.,  Vol.  X,  Part  II,  p.  1462. 
<  NILES,  Vol.  XL.VI,  pp.  100, 101 ;  April  12, 1834,  pp.  115, 116, 132. 
5  Ibid,,  p.  66,  March  29.  6  ibid.,  p.  218,  May  3. 

1 1bid.,  p.  379 ;  for  other  elections,  ibid.,  p.  445. 
8  March  28, 1834,  C.  D.,  Vol.  X,  Part  I,  p.  1187. 


346  THE  SECOND  BANE  OF  THE  UNITED  STATES 

But  such  a  victory  was  of  the  Pyrrhic  order,  injurious  to 
Clay  and  ruinous  to  the  bank.  His  triumph  once  secured, 
Clay  at  last  determined  that  some  effective  step  in  the  inter- 
ests of  the  bank  ought  to  be  taken.  He  therefore  introduced 
joint  resolutions,  declaring  that  the  secretary's  reasons  were 
insufficient  and  directing  the  restoration  of  the  deposits  after 
July  1,  1834.1  The  resolutions  passed  the  Senate  June  4 
and  June  5.2  But  it  was  too  late,  the  action  of  the  House  on 
the  4th  of  April  having  long  since  determined  that  agree- 
ment between  the  houses  was  impossible.  The  bank  had 
lost  its  chance  because  Clay  saw  fit  to  sacrifice  it  to  the  sup- 
posed interests  of  his  party.3 

The  hope  of  a  charter  would  not  down,  however,  and  the 
desire  to  secure  the  return  of  the  deposits  would  intrude 
itself:  "If  the  Bank  charter  were  renewed  or  prolonged," 
said  Biddle,  "  I  believe  the  pecuniary  difficulties  of  the  coun- 
try would  be  immediately  healed."  If  only  the  deposits 
were  restored  and  the  executive  would  show  itself  friendly, 
the  bank  would  make  an  effort  to  relieve  the  country ;  but  if 
"  the  Executive  continued  its  efforts  to  destroy  the  Bank," 
the  return  of  the  deposits  alone  would  produce  no  change.4 
If  nothing  were  done  by  Congress,  the  bank  would  continue 
its  contraction  and  the  summer  and  autumn  would  see 
unusual  distress.5  But  this  was  an  unmeaning  threat;  every 
day  the  resolution  of  the  bank  managers  weakened,  and  in 
June  they  would  gladly  have  capitulated  if  only  a  vote  of 
Congress  could  be  secured  ordering  the  restoration  of  the 

1  May  27, 1834,  C.  D.,  Vol.  X,  Part  II,  p.  1813. 

2  Ibid.,  pp.  1880, 1895, 1896.    Vote  29  to  16,  and  28  to  16. 

3  The  bank,  said  King,  of  Georgia,  lost  its  chance  by  the  action  of  its  supporters 
in  making  a  party  question  oat  of  the  removal. — March  10, 1834,  ibid.,  Part  I,  p.  847. 

*  Biddle  to  General  John  S.  Smith,  of  Baltimore,  May  9, 1834,  P.  L.  B.,  Vol.  V, 
p.  192. 

&  "  Of  one  thing  I  am  certain  —  that  if  nothing  is  done  this  session,  we  shall  have 
a  summer  and  fall  such  as  have  not  often  been  experienced."— Biddle  to  Webster, 
May  15, 1834,  ibid.,  p.  195. 


DEFEAT  OP  THE  BANK  347 

deposits.1  In  truth,  they  were  now  struggling  blindly  to 
find  some  pretext  to  avoid  an  open  confession  of  certain 
defeat.  All  around  them  were  heard  the  murmurs  of  one- 
time friends  who  were  rising  in  revolt  against  their  action. 
The  Boston  Whigs  threatened  to  denounce  the  bank;2  the 
New  York  Whigs  asserted  that  further  pressure  would  result 
in  the  loss  of  the  autumn  elections  in  that  state,  everybody 
there  being  convinced  that  the  bank  could  relax  and  Mr. 
Gallatin  expressing  "himself  strongly  on  the  subject."3 
Biddle's  close  friends  in  the  management  began  to  see  light 
also,  and  advised  "  judicious  action  ....  which  may  save 
our  beloved  country  from  the  curse  of  Van  Burenism  and 
thereby  save  the  Bank."  * 

When  at  last  Congress  adjourned  without  taking  action, 
and  the  bank  was  left  to  continue  its  course  without  present 
hope  of  re-charter  or  the  restoration  of  the  deposits,  the  con- 
viction that  all  was  over  was  irresistible.  A  committee  had 
been  appointed  in  June  to  determine  what  should  be  done, 
and  the  result  was  the  only  possible  one.  Jackson's  tri- 
umphant assertion  that  after  the  close  of  the  session  of  Con- 
gress in  June,  "the  bank  ....  announced  its  ability  and 
readiness  to  abandon  the  system  of  unparallelled  curtail- 
ment ....  and  to  extend  its  accommodations  to  the  com- 
munity "  was  justified.6  In  the  resolutions  of  June  27  the 
bank  management  distinctly  states  that  the  step  is  advisable 
"  in  consequence  of  the  approaching  adjournment  of  Con- 
gress without  having  taken  any  steps  to  restore  the  violated 
rights  [i.  e.,  the  deposits]  of  the  Bank."8  So,  too,  in  the 
report  of  July  11,  the  "adjournment  of  Congress"  is  put 

1  Biddle  to  A.  Porter,  June  14, 1834,  ibid.,  p.  231. 

2  Biddle  to  W.  Appleton,  July  4, 1834,  ibid.,  p.  245. 

3  R.  M.  Blatchford  to  Biddle,  July  5, 1834,  B.  P. 

<  Mathew  L.  Bevan  to  Biddle,  New  York,  July  9, 1834,  ibid. 

5  President's  message,  Dec.  1, 1834,  Messages  and  Papers,  Vol.  Ill,  p.  109. 

«-S.  D.  17,  23d  Cong.,  2d  Sess.,  p.  83. 


348   THE  SECOND  BANK  OF  THE  UNITED  STATES 

forward  as  the  reason  for  modifying  the  policy  of  the  bank.1 
It  is  plain  that  a  great  part  of  what  the  bank  had  done  had 
been  planned  with  an  eye  to  its  effect  on  Congress. 

The  relaxation  of  July  was  virtually  final.  The  bank  did 
not  intend  to  remove  all  restrictions  and  did  not  do  so,  but 
the  state  banks,  no  longer  fearful  of  the  monster,  had  begun 
a  rapid  expansion;  some  of  them  had  even  begun  extensive 
exchange  operations.  The  bank  might  therefore  as  well 
follow  suit,  and,  moreover,  it  was  constantly  embarrassed  by 
its  half-hearted  policy.  On  July  18  Jaudon  wrote  Biddle, 
saying  that  the  papers  charged  the  bank  with  having  cur- 
tailed for  political  effect,  and  that  it  was  now  expanding  with 
the  purpose  of  engineering  another  contraction  in  the  au- 
tumn. Our  friends,  he  mournfully  concludes,  say  "they  do 
not  know  how  to  answer  them." 2  On  the  24th  he  writes 
that  the  western  friends  of  the  bank  want  accommodations, 
too,  "and  I  suppose  that  we  shall  be  obliged  to  let  the 
western  offices  extend  their  purchases  of  Bills  on  New  Orleans 
without  reference  to  the  amount  of  their  receipts  from  col- 
lections for  other  offices." '  The  accommodations  demanded 
were  granted,  the  bank  putting  an  end  to  all  restrictions  in 
September,  and  thus  ending  the  last  faint  efforts  to  force 
action  by  inflicting  commercial  ruin. 

The  long,  harsh  struggle  of  1833-34  completely  changed 
the  position  of  the  bank  in  public  favor.  It  had  now  become 
extremely  unpopular,  and  for  the  first  time  parties  clearly 
divided  on  the  issue  of  bank  or  no  bank.  The  strife  had 
been  transformed,  too,  from  a  fair  and  open  contest  to  the 
most  savage  and  implacable  struggle.  This  temper  had  been 
thoroughly  developed  on  both  sides  by  the  contest  in  Con- 
gress; by  the  suffering  resulting  from  the  panic;  by  the 
cumulation  of  irritating  circumstances:  the  pension  ques- 

18.  D.  17,  23d  Cong.,  2d  Sess.,  p.  83. 

2  Jaudon  to  Biddle,  July  18, 1834,  B.  P.  8  Ibid. 


DEFEAT  OF  THE  BANK  349 

tion ;  the  censure  of  the  president ;  the  protest ;  the  inflam- 
matory memorials;  the  rejection  of  the  appointments  of 
Taney  and  the  government  directors ;  the  refusal  of  the  bank 
to  permit  investigation  by  the  House  committee;  the  votes 
of  the  two  houses.  The  feeling  generated  by  these  events 
was  tremendous.  "It  will  be  difficult,"  says  Benton,  "for 
people  in  after  times  to  realize  the  degree  of  excitement,  of 
agitation  and  of  commotion  which  was  produced  by  this 
organized  attempt  to  make  panic  and  distress.  The  great 
cities  especially  were  the  scene  of  commotions  but  little  short 
of  frenzy."1 

The  opponents  of  Jackson,  convinced  that  he  was  aiming 
at  absolute  dominion  over  Congress,  soon  lost  their  temper. 
Neither  Clay  nor  Webster,  however,  can  be  counted  of  this 
number,  though  Calhoun,  intense  in  his  convictions,  showed 
much  bitterness.  Speaking  of  the  government  directors,  he 
exclaimed:  "Directors!  did  I  say?  No !  spies  is  their  proper 
designation ! " 2  and  after  the  protest  he  spoke  with  indigna- 
tion of  the  president.  "  Infatuated  man ! "  he  cried,  "blinded 
by  ambition —  intoxicated  by  flattery  and  vanity !  Who,  that 
is  in  the  least  acquainted  with  the  human  heart  —  who,  that 
is  conversant  with  the  page  of  history,  does  not  see,  under 
all  this,  the  workings  of  a  dark,  lawless  and  insatiable  am- 
bition!"3 McDuffie,  in  the  House,  was  more  passionate, 
more  intense,  more  Thrasonic,  and  more  incoherent  in  his 
wrathful  outpourings.4  Burgess,  of  Rhode  Island,  shrieked 
that  the  "miscreants  of  our  times  and  of  our  country  "  should 
"remember  the  Marats,  the  Dantons,  the  Robespierres  of 
other  times  and  other  countries,"  and  declared  that  the  out- 
raged American  people  would  quench  "  the  flaming  ruins  of 
their  country  ....  by  the  immolation  of  those  traitors  who 
had  lighted  up  the  conflagration."5  The  venerable  Senator 

1  Thirty  Years,  Vol.  I,  p.  421.  2  c.  D.,  Vol.  X,  Part  I,  p.  212,  Jan.  12, 1834. 

3  Ibid.,  Part  II,  p.  1645,  May  6, 1834.  <  Ibid.,  Part  III,  p.  3459.          5  Ibid.,  p.  3166. 


350  THE  SECOND  BANK  OP  THE  UNITED  STATES 

Bobbins,  of  Rhode  Island,  asserted  that  "  the  fearful  and 
momentous  struggle "  between  liberty  and  despotism  had 
" already  commenced,"  and  that  unless  checked  "blood  must 
flow."  *  Ewing,  of  Ohio,  commenting  on  Jackson's  assertion 
in  his  protest  that  he  bore  upon  his  "  person  enduring 
memorials  of  that  contest  in  which  American  liberty  was 
achieved,"  queried: 

If  it  be  true  that,  boy  or  lad,  he  got  hurt  any  where,  or  any  how, 
at  any  time,  or  by  any  accident,  during  the  revolutionary  war,  what 
effect  ought  it  to  have,  or  should  it  have  had,  if  urged  in  time,  in 
the  grave  judgment  of  the  Senate,  upon  their  construction  of  the 
constitution?  The  Senate  say  to  the  President,  You  had  no  right 
to  seize  the  public  purse;  the  constitution  intrusts  its  custody  to 
Congress;  pray  restore  it.  Hear  the  reply:  You  are  mistaken  in 
your  construction  of  the  constitution;  I  got  hurt  when  I  was  a  boy, 
in  the  time  of  the  Revolution,  and  I  have  the  scar  on  me  yet.2 

Poindexter  was  furious  in  his  assaults.  The  protest,  he 
declared,  "is  wholly  vindictive  and  libellous  ....  I,  for 
one,  sir,  spurn  this  foul  effort  to  cast  a  stigma  on  the  purity 
and  patriotism  of  this  honorable  body,  ....  I  throw  back 
the  libel  into  the  hands  of  its  reckless,  infatuated  author. ": 
Jackson,  declared  his  opponents,  was  a  tyrant,  a  usurper,  a 
Napoleon,  a  Cromwell,  a  George  III.,  an  infatuated  old  man, 
a  turbulent  military  chieftain. 

The  language  of  Jackson's  supporters  in  Congress 
matched  that  of  his  opponents,  and  the  depths  of  the 
ridiculous  were  frequently  reached  in  the  search  to  attain 
the  moral  sublime,  as  when  Peyton,  of  Tennessee,  concluded 
a  glowing  peroration  by  shouting: 

Yes,  sir,  he  had  trod  the  paths  of  glory  which  Washington  had 
trod  before  him.  The  historian  had  but  to  complete  his  office,  and 
his  name  was  immortal;  the  sculptor  to  perform  his  task,  and  he 
stood  beside  the  father  of  his  country,  with  the  finger  which  penned 

1  C.  D.,  Vol.  X,  Part  III,  p.  1462,  April  24, 1834. 

2  April  21, 1834,  ibid.,  p.  1411.  3  jftfd.,  Part  I,  p.  1340,  April  17, 1834. 


DEFEAT  OF  THE  BANK  351 

the  Declaration  of  Independence  pointing  him  out  as  the  noblest 
Roman  of  his  day.  And,  sir,  this  is  the  man,  under  these  circum- 
stances, against  whom  all  these  shafts  are  hurled!  Yes,  sir,  even 
the  kitchen  knife  of  Kentucky,  which  has  been  cast  aside  for  years, 
is  hunted  up  and  thrown  into  this  House,  full  of  rust  and  gaps,  to 
be  sawed  across  the  bosom  of  a  patriot.1 

The  bank,  in  the  vocabulary  of  the  Democrats,  was  a  mon- 
ster, a  hydra,  a  dark,  subtle,  demoniac  power,  striving  to 
overthrow  the  constitution  and  hurl  free  institutions  into 
ruin.  To  one  section  of  the  party  Biddle  appeared  as  Em- 
peror Nicholas,  the  imperial  despot  who  sought  to  extend 
the  sway  of  a  moneyed  aristocracy  over  the  nation;  to 
another  wing  he  was  "old  Nick,"  equipped  in  imagination 
with  horns,  hoofs,  and  tail. 

But  no  one  was  so  thoroughly  at  home  in  this  tempes- 
tuous warfare  as  the  aged  president  of  the  United  States. 
As  his  opponents  continued  to  call  down  anathemas  upon 
his  gray  head,  his  temper  rose  higher  and  higher,  until  it 
finally  reached  the  bursting  point.  With  paroxysms  of  rage 
he  drove  popular  deputations  from  his  presence.  In  re- 
sponse to  the  request  of  the  Baltimore  delegation  for  relief, 
he  burst  out :  "  Relief ,  sir !  ....  Come  not  to  me,  sir !  —  Go 
to  the  monster! —  ....  It  is  folly,  sir,  to  talk  to  Andrew 
Jackson — The  government  will  not  bow  to  the  monster." 
The  chairman  meekly  injecting  something  about  the  people, 
the  exasperated  old  man  exclaimed:  "The  people!  talk  to 
Andrew  Jackson,  sir,  about  the  people!  The  people,  sir, 
are  with  me.  I  have  undergone  much  peril  for  the  liberties 
of  this  people,  and  Andrew  Jackson  yet  lives,  to  put  his 
foot  upon  the  head  of  the  monster,  and  crush  him  to  the 
dust."  The  chairman  remonstrated  that  Jackson's  experi- 
ment was  ruining  the  merchants.  "The  mammoth,  sir," 
shouted  the  president,  "  has  bled  you !....!  would  rather 
undergo  the  tortures  of  ten  Spanish  inquisitions  than  that 

1  Ibid.,  Part  II,  p.  2659,  Feb.  6, 1834. 


352  THE  SECOND  BANK  OP  THE  UNITED  STATES 

the  deposites  should  be  restored,  or  the  monster  be  rechar- 
tered."  And  thus  he  continued  until  his  rage  had  grown 
too  great  to  permit  further  discussion.1  To  the  Philadelphia 
committee  he  said:  "Andrew  Jackson  never  would  restore 
the  deposites  to  the  bank  —  Andrew  Jackson  would  never 
recharter  that  monster  of  corruption  —  ....  that  sooner 
than  live  in  a  country  where  such  a  power  prevailed,  he 
would  seek  an  asylum  in  the  wilds  of  Arabia."  As  for 
"  brokers  and  stock  speculators,  and  all  who  were  doing 
business  upon  borrowed  capital,  ....  such  people  ought 
to  break,"  and  he  threatened  repeatedly  to  put  an  end  to 
the  circulation  of  branch  drafts  by  forbidding  their  receipt 
in  payment  of  the  government  revenues.2 

Such  being  the  temper  of  the  leaders,  that  of  the  follow- 
ers certainly  did  not  lag  behind.  The  grand  jury  of  David- 
son county,  North  Carolina,  solemnly  presented  Andrew 
Jackson  for  "his  arbitrary,  despotic  and  unconstitutional 
conduct,  in  seizing  the  public  money,"  his  "reckless  obsti- 
nacy," his  "haughty  and  kingly  deportment,"  besides  a 
number  of  other  equally  monstrous  offenses.3  The  Rich- 
mond Whig  declared  that  if  Congress  adjourned  without 
doing  anything  to  end  the  distress,  "the  clangor  of  arms  and 
the  voice  of  battle  "  would  "  resound  in  the  land  "  within  six 
months.4  The  Commercial  Herald  of  Philadelphia  theatri- 
cally exclaimed  :  "  We  say  in  the  face  of  the  world,  and 
with  a  solemn  reliance  on  the  God  of  the  free,  that  this  people 
are  not  excusable  for  remaining  an  hour  longer  quiet  under 
the  present  state  of  constitutional  degradation,  and  of  national 


S,  Vol.  XL  VI,  p.  9,  March  1,  1834;  C.  D.,  Vol.  X,  Part  in,  pp.  3074,  3075. 
Report  of  committee  signed  by  twenty-two  members. 

2NILES,  ibid.,  p.  31,  March  8,  1834;  C.  D.,  ibid.,  p.  3074.  On  Jackson's  sentiments 
about  borrowers  see  almost  the  same  expression  in  his  letter  to  J.  A.  Hamilton, 
Feb.  2,  1834,  Reminiscences,  p.  270. 

3  NILES,  Vol.  XL  VI,  pp.  155,  156,  May  3,  1834,  quoting  the  New  York  Courier  and 
Enquirer. 

*  CLAT,  of  Alabama,  quoting  the  Whig,  March  25,  1834,  C.  D.,  Vol.  X,  Part  III, 
p.  3144. 


DEFEAT  OP  THE  BANK  353 

and  individual  ruin.  Let  the  crisis  be  met!"  l  A  Washing- 
ton letter  published  in  the  Richmond  Compiler  voiced  the 
writer's  "sincere  belief"  that  violence  was  certain.  "My 
friends  in  the  Northern  cities  tell  me  that,  in  their  opinion, 
pistols  will  be  flashed  and  dirks  drawn  in  their  streets  before 

the  expiration  of  another  month There  must  be  a 

bloody  revolution.  For  one,  though  a  cool  and  considerate 
man,  I  confess  I  am  ready  to  whet  my  knife."3  Both  Jack- 
son and  Biddle  received  anonymous  letters  threatening  assas- 
sination, and  Jackson  having  had  the  bad  taste  to  allow  some 
to  be  published,  the  Globe  overflowed  with  rage  against  the 
opposition  which  was  inciting  murder  at  the  hands  of  "  bank 
minions."  Biddle,  meanwhile,  attained  immense  fame.  His 
appearance  in  Wall  street  was  a  signal  for  the  gathering 
of  enormous  crowds  "  to  gaze  upon  the  man  who "  had 
"been  made  conspicuous  by  the  unrelenting  hostility  of 
President  Jackson,"  while  the  merchants  cheered  him  at  the 
exchange.3 

The  Senate,  too,  was  savagely  assailed  as  an  oligarchy 
attempting  to  overthrow  the  executive  power  in  its  own 
interest.  The  Pennsylvanian  thought  it  should  be  amended 
or  abolished,  and  intimated  that  violence  would  be  visited 
upon  the  senators  if  they  refused  to  pass  the  appropriation 
bill.4  "Fearful  reports"  were  "put  in  circulation."  Rumor 
asserted  that  the  president  was  about  to  issue  a  proclamation 
against  the  Senate,  if  his  protest  was  not  received,  "and  that 
a  gathering"  was  "already  making  at  Washington  to  sup- 
port him,  in  certain  ulterior  measures."1  At  Baltimore 

l  IDEM,  ibid.,  quoting  the  Herald.  2  IDEM,  ibid.,  quoting  letter  of  Feb.  16. 

3  Diary  of  Philip  Hone,  Vol.  I,  p.  96,  March  15, 1834. 

*  "The  democrats  never  heartily  sanctioned  it,  and  now,  having  the  power, 
should  amend  or  get  rid  of  it  once  and  forever." 

"Let  them,  if  they  dare,  and  hasten  the  bursting  of  the  storm  which  is  already 
lowering  above  their  heads.  They  have  yet  to  learn  to  what  an  indignant  people 
may  be  aroused."— NILES,  Vol.  XLVI,  p.  131,  April  26, 1834,  quoting  the  Pennsylvanian. 

6  Ibid.,  p.  145,  May  3, 1834. 


354  THE  SECOND  BANK  OF  THE  UNITED  STATES 

McDuffie  referred  to  these  reports  and  was  tumultuously 
cheered  when  he  said  "that  ten  days  after  the  entrance  of 
the  soldiers  into  the  senate  chamber,  to  send  the  senators 
home,  that  200,000  volunteers  would  be  in  Washington." ' 
Meanwhile  memorials  and  resolutions  poured  in,  for  and 
against  the  action  of  the  president  in  removing  the  deposits, 
filled  with  denunciations  and  intemperate  language.  Paint- 
ers, carpenters,  coopers,  tanners,  watchmakers,  cab-drivers, 
shoemakers,  curriers,  blacksmiths,  and  all  the  other  com- 
ponent parts  of  the  "sovereign  people"  joined  in  the  dis- 
cordant clamor.  The  inhabitants  of  Bucks  county,  Pennsyl- 
vania, resolved, 

As  the  deliberate  opinion  and  the  decided  conviction  of  this 
meeting,  That  if  Andrew  Jackson,  President  of  the  United  States, 
is  sustained  by  the  people  in  his  reckless  usurpations,  and  the 
monstrous  doctrines  promulgated  by  him  and  his  kitchen  cabinet, 
in  the  late  protest,  and  sought  to  be  enforced  by  prostituted 
presses,  and  by  his  pledged  and  collared  partisans,  tending  to  con- 
centrate all  power,  executive,  legislative  and  judicial,  in  himself, 
there  is  an  end  to  liberty  in  this  country,  and  the  last  refuge  of 
freedom,  the  world's  last  hope,  will  cease  to  be  a  republic  ;2 

while  the  freemen  of  Schuylkill  county  in  the  same  state 
resolved  to  the  contrary, 

That  we  approve  highly  of  the  course  pursued  by  our  vener- 
able Chief  Magistrate,  with  regard  to  the  United  States  Bank,  that 
we  view  it  as  a  corporation  dangerous  to  the  permanency  of  our  free 
institutions;  subversive  of  a  free  and  unbiassed  expression  of  public 
sentiment,  corrupt  and  corrupting,  and  now,  in  its  desperation,  a 
vampyre  that  would  draw  the  last  drop  of  blood  from  the  veins  of 
the  honest  yeomanry  of  the  country,  and  revel  in  the  glorious  exhi- 
bition of  the  effects  of  its  secret  implements  of  destruction.3 

The  personal  enmities  and  animosities  engendered  by  the 
struggle  may  be  measured  by  the  social  ostracism  which  was 
visited  upon  Philadelphians  like  C.  J.  Ingersoll  who  deserted 

1  NILES,  Vol.  XL VI,  p.  146. 

2  Ex.  Doc.  435,  23d  Cong.,  1st  Sess.,  p.  4.  »  Ex.  Doc.  144,  23d  Cong.,  1st  Sess. 


DEFEAT  OF  THE  BANK  355 

the  bank's  cause  in  1833,  and  by  Adams's  treatment  of 
Richard  Rush,  who  had  warmly  supported  the  bank  in  1828, 
had  requested  the  presidency  of  the  Washington  office  in 
1831,1  and  in  1834  urged  his  supporters  to  "go  on  with" 
their  "patriotic  work  of  extirpating  such  a  corporation."2 
With  righteous  sorrow  Adams  gave  Rush  what  old  John 
Knox  would  call  a  "  discharge  of  his  friendship;"  to  Adams 
Rush  was  a  moral  pariah.3 

These  social  ostracisms;  these  breakings  of  old-time 
friendships;  these  repeated  charges  and  countercharges; 
these  insinuations  and  insults,  criminations  and  recrimina- 
tions, bred  a  vehement  ferocity  in  the  congressional  campaign 
of  1834  unknown  for  many  years.  It  was  by  all  odds  the 
hottest  campaign  in  which  the  bank  was  involved.  It  was 
the  last  desperate  effort  of  the  institution  to  secure  a  charter 
against  the  will  of  the  president,  and  the  last  occasion  on 
which  the  Whigs  identified  themselves  with  the  big  bank. 
The  political  passions  generated  during  the  struggle  over 
the  deposits  had  reached  an  excessive  point,  where  no  one 
listened  to  arguments,  where  everyone  wished  to  declaim  at 
the  same  moment,  and  where  partisans  on  both  sides  were 
quick  to  proceed  from  words  to  blows  and  from  threats  to 
outrage.  Each  party  to  the  contest  felt  that  the  struggle 
would  be  decisive  of  the  bank's  hopes.  So  important  did 
Blair  deem  the  crisis  that  he  began  in  June  the  publication 
of  the  Extra  Globe,  to  be  issued  at  brief  intervals  through- 
out the  campaign,  with  the  object  of  contributing  "one 
feeble  ray  to  aid  in  disclosing  the  machinations  of  the  great 
Tempter  which  now  seeks  to  pollute  and  destroy  the  purest 
and  happiest  Government  ever  known  upon  earth."  4  The 

i  To  Biddle,  Jan.  31, 1831,  B.  P.  2  Extra  Globe,  Vol.  I,  p.  122. 

3  "  I  received  a  letter  from  Richard  Rush,  still  friendly  in  terms,  but  it  closes  all 
confidential  correspondence  between  him  and  me  forever.  I  can  never  repose  con- 
fidence in  him  again There  is  a  moral  obliquity  in  his  present  course  which 

proves  that  his  principles  sit  light  upon  him,  and  that  he  cannot  stand  fire  in  a 
minority  long."— ADAMS,  Memoirs,  Vol.  IX,  p.  40,  Nov.  29, 1833. 

*  Announcement  of  reasons  for  issue,  Extra  Globe,  Vol.  I,  p.  1,  June  28, 1834. 


356  THE  SECOND  BANK  OF  THE  UNITED  STATES 

bank,  on  the  other  hand,  relaxed  its  now  evidently  impolitic 
contraction,  and  covered  the  Union  with  swarms  of  articles 
disseminated  for  it  in  scores  of  instances  under  the  franking 
privilege  of  its  supporters  in  Congress ;  the  Senate  Commit- 
tee on  Finance,  with  John  Tyler  as  reporter,  investigated  the 
bank  and  prepared  a  report  supporting  it  on  all  essential 
points ;  and  the  Whigs  went  to  work  with  zeal  to  secure  the 
elections  and  prepare  for  a  re-charter.  Biddle  hoped  still: 
"when  that  \_i.  e.,  the  election]  is  over  it  will  be  time,  I  think, 
to  discuss  the  renewal  or  the  modification  of  the  Charter."1 

The  elections  were  attended  with  riot  and  bloodshed, 
especially  at  Philadelphia,  where  a  number  of  houses  were 
burned  by  the  mob ;  and  when  the  decisive  day  came,  Biddle 
took  precautions,  not  so  much  for  himself  as  for  his  family 
and  the  bank.  Wife  and  children  were  sent  out  of  the  city ; 
he  made  his  house  literally  his  "castle,"  filling  it  with 
armed  men,  while  he  stationed  a  force  provided  "  with  mus- 
kets and  bayonets  "  in  the  bank  on  the  night  of  the  election 
to  provide  for  its  safety.2  The  precautions  were  unneces- 
sary. No  physical  assault  was  made,  but  when  morning 
dawned  upon  Biddle  standing  to  his  defenses  in  house  and 
bank,  it  brought  the  news  of  a  worse  disaster  than  any  mere 
mob  could  inflict.  The  Whigs  were  everywhere  defeated, 
and  the  bank's  days  were  numbered. 

The  campaign  had  another  important  effect.  The  Whigs 
at  last  were  convinced  that  their  alliance  with  the  bank  was 
a  blunder,  and  henceforth  the  party  silently  dissociated  itself 
from  the  moribund  monster.  The  advisability  of  doing  so 
had  been  pointed  out  much  earlier  by  that  subtile  politician 
Thurlow  Weed,3  and  immediately  upon  the  close  of  the 
election  he  uttered  a  joyful  nunc  dimittis  in  the  Evening 
Journal  : 

1  To  C.  A.  Davis  [Major  Downing],  Sept.  14, 1834,  P.  L.  B.,  Vol.  V,  p.  257. 

2  Biddle  to  John  Tyler,  Oct.  23, 1834,  ibid.,  p.  270. 

3  WEED,  Autobiography,  p.  431. 


DEFEAT  OP  THE  BANK  357 

There  is  one  cause  of  congratulation  connected  with  the  results 
of  the  recent  election  in  which  even  we  can  participate.  It  has  ter- 
minated the  United  States  Bank  war After  staggering  along 

from  year  to  year  with  a  doomed  bank  upon  our  shoulders,  both 
the  bank  and  our  party  are  finally  overwhelmed.  The  burden, 
however,  is  now  removed,  and  we  hope  to  see  the  efforts  of  a  great 
and  patriotic  party  directed,  with  better  chances  of  success,  to  the 
ultimate  restoration  of  the  rights  of  tLe  people  and  the  honor  of 
the  country.1 

Four  days  later  the  Journal  of  Commerce,  a  staid  Whig  organ, 
published  a  review  of  the  reasons  for  the  defeat,  in  which 
every  reason  came  back  to  the  connection  with  the  bank, 
which  gave  the  party  a  hateful  aristocratic  character:  the  sup- 
port of  the  institution,  right  or  wrong,  the  panic  fomented  by 
"the  tools  of  party  for  political  effect,"  the  unmeasured  attacks 
upon  the  president  in  connection  with  the  removal  of  the 
deposits,  the  unjustifiable  curtailments  of  1833—34  —  these 
were  the  causes  of  the  party's  defeat  ;2  while  Blair  exulted 
because  the  party  had  ruined  the  bank.  "  Had  the  task  been 
assigned  to  us  to  delineate  for  the  opposition  a  course  of  con- 
duct which  should  utterly  destroy  the  present  Bank,  and 
forever  prevent  the  establishment  of  another,  we  could  not 
have  devised  one  so  effectual  as  that  which  they  have  pur- 
sued." At  the  same  time  he  admitted  that  had  the  Whigs 
renounced  the  bank  in  1832  "and  come  out  in  favor  of  a 
new  institution,  with  a  charter  much  modified,  it  would  have 
been  difficult,  if  not  impossible,  to  prevent  their  success."1 
To  these  judgments  unqualified  assent  may  be  yielded.  Few 
causes  have  ever  been  more  unwisely  managed  than  that  of 
the  bank  from  the  beginning  of  1832  to  the  end  of  1834, 
and  now  it  had  to  see  its  friends,  unwilling  to  be  involved 
in  its  overthrow,  silently  desert  it.  Even  Webster,  its  great- 

1  Ibid.,  quoting  the  Albany  Evening  Journal,  of  Nov.  15, 1834. 

2  Extra  Globe,  Vol.  I,  pp.  354,  355,  357,  358,  quoting  the  Journal  of  Commerce  of 
Nov.  19, 1834. 

3  Ibid.,  p.  355,  Nov.  24, 1834. 


358  THE  SECOND  BANK  OP  THE  UNITED  STATES 

est  and  most  influential  champion,  coldly  gave  up  its  advo- 
cacy, declaring  that  "the  people  had  decided  against"  the 
bank,  "public  opinion  had  decided  against  it!"1  Biddle 
upbraided  him  sorrowfully  and  reproachfully  for  his  apos- 
tacy,2  but  from  this  time  Webster's  hearty  co-operation 
ceased. 

Jackson's  message  of  1834  as  usual  expressed  hostility  to 
the  bank.  The  president  censured  it  for  withholding  the 
dividend  due  on  the  government's  shares  in  order  to  force 
payment  of  the  bank's  charges  for  the  protested  French  bill, 
and  closed  by  recommending  the  sale  of  the  government's 
stock,  the  cessation  of  the  reception  of  its  notes  in  payment 
of  government  revenues  until  the  bank  had  paid  the  divi- 
dend, and  the  repeal  of  "  all  laws  connecting  the  Govern- 
ment or  its  officers  with  the  bank,  directly  or  indirectly. "; 
As  a  set-off,  the  Senate  Committee  on  Finance  offered  its 
report  favorable  to  the  bank.  The  message  and  report  were 
supported  and  attacked,  but  there  was  little  heart  in  the  sup- 
port and  not  much  more  in  the  attack.  The  affair  was  vir- 
tually closed. 

1  In  Senate,  Feb.  26, 1835,  The  Works  of  Daniel  Webster,  Vol.  IV,  p.  200. 

2  Biddle  to  Webster,  April  6, 1835,  P.  L.  B.,  Vol.  V,  p.  369. 

3  Messages  and  Papers,  Vol.  Ill,  pp.  109-11. 


CHAPTER  XV 

THE  LAST  DAYS  OF  THE  BANK 

THE  results  of  the  election  of  1834  having  decided  that  the 
bank  was  doomed,  it  had  now  to  prepare  for  the  end,  and  it 
began  immediately  to  do  so.  Accordingly  one  would  expect 
that  its  business  would  diminish  all  through  1835.  But  this 
was  not  the  case,  for  the  monthly  returns  furnish  proof  that 
the  bank  carried  a  larger  active  debt  through  the  last  months 
of  its  existence  than  at  almost  any  other  period  of  its  history. 

A  review  of  its  transactions  will  show  how  extensive  they 
were.  By  February,  1835,  the  total  debt  was  $55,000,000; 
by  July  it  was  $65,000,000;  and  by  January,  1836,  it  stood 
at  $59,000,000.  The  remaining  items  were,  as  a  matter  of 
course,  correspondingly  extensive.  Thus  the  note  circula- 
tion reached  a  higher  level  in  1835  than  in  any  other  year 
of  the  bank's  history.  On  July  1  it  stood  at  $25,000,000, 
and  at  the  close  of  the  year  it  was  over  $23,000,000.  All 
through  1835  the  amount  of  specie  held  was  also  unusually 
large.  At  the  beginning  of  February  the  amount  held  was 
over  $16,000,000,  on  October  1  it  was  $12,545,000,  and  in 
December  it  was  $8,749,000.  The  total  showed  no  consid- 
erable diminution  until  March,  when  it  was  $5,595,000. 
This  result  was  due  to  the  increase  of  the  bank's  transactions 
because  of  its  new  Pennsylvania  charter.  In  like  manner, 
deposits  kept  up  until  August  and  then  fell  away  rapidly. 
The  whole  movement  is  revealed  by  the  chart  on  p.  361.1 

1  Discounts  on         Discounts  on      Domestic  Deposits  of 

Personal  Security    other  Security     Exchange  Total          Circulation         Specie       Individuals 

Feb.  1 31,354,000       3,962,000     20,208,000    55,524,000    19,733,000    16,369,000    8,755,000 

April 32,161,000       5,013,000      22,926,000    60,100,000    20,544,000    16,448,000    9,372,000 

Aug 33,638,000       6,478,000      24,198,000    64,314,000    24,329,000    12,883,000    8,508,000 

Nov 30,499,000       9,176,000      17,854,000    57,529,000    23,031,000    10,224,000    5,406,000 

Jan.,  1836... 25,775,000      14,206,000      19,251,000    59,232,000    23,075,000      8,417,000    4,369,000 
— 8.  D.  128,  25th  Cong.,  2d  Sess.,  and  8.  D.  312,  24th  Cong.,  1st  Sess. 

359 


360  THE  SECOND  BANK  OP  THE  UNITED  STATES 

One  would  be  misled,  however,  if  lie  supposed  that  the 
business  of  the  bank  was  increased  because  the  managers  did 
not  intend  to  close  up  its  concerns.  Most  of  the  increase 
was  explicable  enough,  resulting  from  the  policy  of  the  direc- 
torate in  making  long  loans  in  settling  up  the  bank's  affairs 
— loans  which  appeared  as  discounted  paper  in  the  monthly 
returns.  This  policy  contemplated  getting  control  of  the 
capital  without  exerting  pressure  upon  the  business  commu- 
nity. The  enormous  amount  of  specie  secured  and  retained 
so  long  as  the  bank  adhered  to  its  design  of  closing  up, 
proves  how  successful  the  effort  was.  Writing  in  June, 
Biddle  pointed  out  the  policy  under  which  he  was  acting, 
showing  that  the  attempt  was  to  concentrate  the  capital  in 
the  East,  "  while  the  diminution  is  going  rapidly  on  in  the 
more  distant  and  unmanageable  points.  This  is  in  fact  the 
great  problem.  I  am  endeavoring  to  work  the  insensible 
concentration  of  the  funds  of  the  Bank  in  large  masses  of 
disposable  capital,  while  the  process  of  reduction  is  going  on 
without  being  felt."1 

Remembering  this  statement  of  policy,  it  is  easy  to  ex- 
plain most  of  the  business  done.  Thus  it  will  be  found  that 
the  dealings  in  exchange  were  particularly  large.2  Not  only 
so,  but  the  major  part  of  the  bills  were  drawn  on  the  East 
and  New  Orleans,  while  those  on  the  West  diminished  almost 
to  the  vanishing  point.  Thus  out  of  $16,614,000  in  bills  of 
inland  exchange,  falling  due  about  March  3,  1836,  $14,970,- 
000  were  payable  at  the  offices  of  Philadelphia,  New  York, 
Boston,  and  New  Orleans,  while  at  all  the  western  offices  the 
sum  payable  was  only  $95,000.3  Another  fact  will  also  be 
revealed:  the  exchange  transactions  in  the  Mississippi  val- 
ley, though  infinitely  less  extended  than  usual,  are  much 
larger  than  usual  at  New  Orleans,  $7,000,000  being  payable 

1  Biddle  to  C.  A.  Davis  [Major  Downing],  June  5, 1835,  P.  L.  B.,  Vol.  V,  pp.  372, 373. 
2 See  Appendices  VI  and  VIII.  3  Ex.  Doc.  118,  24th  Cong.,  2d  Sess.,  p.  128. 


LAST  DAYS  OF  THE  BANK 


361 


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Discounts  on  personal  security 
and  bank  stock 
Domestic  erchange 

Circulation 
Specie 
Total  deposits 



MOVEMENT  OP  PRINCIPAL  ITEMS  WHEN  CLOSING  UP  THE  BANK 


362  THE  SECOND  BANK  OP  THE  UNITED  STATES 

at  this  office  alone  on  the  3d  of  March,  1836.1  In  brief,  the 
loans  at  the  small  and  distant  offices  fell  off  rapidly,  while 
they  increased  rapidly  at  the  large  eastern  branches. 

These  facts  lead  to  one  conclusion  and  only  one:  The 
bank  was  getting  its  capital  from  the  distant  branches  to  the 
Atlantic  offices  by  dealings  in  exchange.  Much  credit  is  due 
to  it  in  this  respect,  for,  if  it  intended  to  cease  business^  this 
was  precisely  the  manner  in  which  it  Must  operate. 

Similarly  in  the  item  of  "discounts  on  other  security" 
the  increase  was  largely  due  to  the  closing  up  of  the  bank's 
concerns,  being  made  with  the  idea,  first  of  keeping  its 
funds  employed  while  its  affairs  were  being  settled,  and  sec- 
ondly as  a  result  of  granting  stock  loans  in  the  process  of 
selling  the  branches.  This  is  the  noticeable  item  in  the 
bank's  returns  in  1835,  and  how  remarkable  the  increase 
was  a  few  figures  will  show.  Thus  in  February,  1835,  the 
amount  loaned  "on  other  security"  was  only  $3,900,000,  a 
figure  which  it  had  never  before  exceeded,  while  by  March  3, 
1836,  it  had  reached  the  enormous  sum  of  $17,300,000, 
according  to  the  monthly  reports.  But  there  were  still  to 
be  added  loans  on  bank  stock  and  other  amounts,  accru- 
ing from  the  sale  of  distant  branches  and  not  yet  known  at 
the  central  office,  which  made  the  aggregate  $28,600,000.2 
Most  of  these  loans  were  made  at  Philadelphia,  New  York, 
Baltimore,  and  Charleston.3  Since  this  state  of  affairs  was 
due  to  the  settlement  of  the  bank's  business,  in  what  appeared 
the  best  and  most  feasible  method,  it  is  not  to  be  condemned. 
It  was  nevertheless  decidedly  unfortunate,  for  it  constitutes 
the  real  beginning  of  a  great  deal  of  the  bad  business  of  the 

1  Ex.  Doc.  118,  24th  Cong.,  2d  Sess.,  p.  128. 

2  "  Besides  the  long  paper  arising  from  these  sales,  loans  for  one  or  more  years 
were  made  both  at  the  bank  and  its  offices,  principally  with  a  view  to  the  employ- 
ment of  the  funds  during  the  process  of  winding  up The  total  amount  of  long 

loans  is,  therefore,  $28,624,289.31,  and  there  are  others  at  some  of  the  other  offices 
which  it  would  take  time  to  ascertain."—  Commissioners  of  the  bank  to  the  govern- 
ment commissioners,  Oct.  19, 1836,  ibid.,  p.  42.  3  Ibid. 


LAST  DAYS  OP  THE  BANK  363 

bank.  Nor  is  it  necessary  to  suppose  that  there  was  any- 
thing wrong  before  this  to  explain  the  bank's  final  over- 
whelming ruin.  The  errors  which  led  to  that  disaster  began 
in  this  loaning  of  immense  sums  on  the  security  of  bonds 
and  stocks,  which  depreciated  rapidly  during  the  critical 
years  of  1836  to  1841,  and  brought  the  bank  into  difficulties 
from  which  it  could  not  be  extricated.  From  the  moment 
when  it  made  its  first  great  loans  on  stock  to  its  fall,  one  can 
trace  the  steps  by  which  it  was  hurried  headlong  to  a  mone- 
tary catastrophe  unequaled  since  the  breaking  of  the  South 
Sea  Bubble.1 

There  remains  for  consideration  only  the  regular  dis- 
counts on  mercantile  paper.  At  the  distant  branches  these 
fell  off  to  a  considerable  extent,  being  transformed  into  bills 
of  exchange  payable  in  the  East;  but  at  Philadelphia,  New 
York,  New  Orleans,  and  some  of  the  other  large  offices  they 
remained  at  the  old  figures  or  exceeded  them.  The  demand 
for  loanable  capital  was  indeed  very  great.  An  immense 
expansion  in  all  lines  of  trade  and  industry  had  been  gather- 
ing head  since  1830,  and  was  now  in  full  swing.  The  price 
of  cotton  in  1835  reached  a  very  high  figure,  and  its  culti- 
vation led  to  an  almost  unparalleled  inflation  in  the  Missis- 
sippi valley.  Everyone  borrowed  money,  quite  regardless 
of  his  future  ability  to  pay,  and  invested  it  in  slaves  or 
land,  with  the  object  of  increasing  the  culture  of  cotton.2 
The  speculation  in  land  was  astonishing;3  north,  south,  east, 
and  west  everyone  was  trading  in  real  estate.4  Internal 

1  See  the  chart,  p.  361,  for  the  movement  in  "  other  securities." 

2  "  The  high  price  of  cotton,  ....  which  began  to  rise  in  1833,  having  made  the 
culture  of  it  a  most  gainful  pursuit,  many  were  tempted  to  borrow  money  for  the 
purpose  of  buying  lands,  and  of  purchasing  slaves,  as  well  as  for  the  ordinary 
interior  traffic."— TUCKEB,  On  Money  and  Banks,  p.  373. 

s  Sales  of  public  lands : 

1833  $  3,900,000        1836   $24,800,000 

1834  4,800,000        1837     6,700,000 

1835  14,700,000 

*  The  writer  of  the  pamphlet  Reflections  upon  the  Present  State  of  the  Currency 
in  the  United  States,  published  in  1837,  declares  that  $30,000,000  were  invested  in  land 


364  THE  SECOND  BANK  OP  THE  UNITED  STATES 

improvements  were  also  projected  on  a  vast  scale,  and  enor- 
mous sums  were  expended  in  the  building  of  railways  and 
canals.  More  miles  of  railway  were  built  in  1835  than  in 
any  other  year  in  that  decade.1  All  this  led  to  a  very  active 
demand  for  capital.  The  facilities  for  meeting  the  demand, 
however,  had  been  created  by  the  chartering  of  numerous 
new  state  banks  and  a  tremendous  expansion  of  their  loans. 
From  1830  to  1836  the  state  banks  in  the  United  States 
increased  their  paper  issues  from  $60,000,000  to  $140,000,- 
000,  their  loans  from  $200,000,000  to  $457,000,000.'  In 
1830  there  were  330  state  banks;3  in  1834,  506.*  Under 
such  circumstances  the  supply  of  capital  in  1835  was  ade- 
quate to  the  demand.5  Consequently  the  Bank  of  the  United 
States  for  the  most  part  steadfastly  resisted  the  temptation 
to  make  loans,  though  not  in  every  instance,  the  New  York 
office  apparently  seizing  the  opportunity  afforded  to  make 
large  and  unjustifiable  loans.6  The  excuse  for  extending  in 
New  York  in  December  must,  however,  be  admitted,  for  in 

in  1835,  which  "  within  a  similar  portion  of  time  had  never  before  attracted  over 
7  or  8,  and  rarely  over  5"  millions.  Even  lands  in  Massachusetts  were  speculated 
in;  "Towns  were  plotted  and  sold  —  Timber,  lands,  stone-quarries  —  water-power 
and  coal-mines, —  everything  that  could  be  twisted  to  a  possibility  of  future  use." — 
Pp.  22,  23.  Sumner  says  that  the  real  estate  of  New  York  was  assessed  at  $309,000,000 
in  1836,  and  that  it  was  not  again  assessed  at  as  high  a  figure  until  1851. — History  of 
American  Currency,  p.  119. 

1 1830         23  miles  in  operation  1836       175  miles  built 

1831  72  miles  built  1837       224     "         " 

1832  134  "  "  1838  416  "         " 

1833  151  "  "  1839  389  "        " 

1834  253  "  "  1840  516  " 

1835  465  " 

— POOH,  Manual  of  Railroads,  1874-75,  p.  xxvii. 

2  Reflections  upon  the  Present  State  of  the  Currency  of  the  United  States,  p.  15. 

3  ADAMS,  GallatMs  Writings,  Vol.  Ill,  p.  356. 

*  Wilde's  report,  Ex.  Doc.  498,  23d  Cong.,  1st  Sess. 

5 It  was  "a  golden  age  for  money-borrowers.  ...  In  January  appeared  the  fol- 
lowing and  like  advertisements :....'  Money  may  be  had  at  5  per  cent,  per  annum 
on  deposit  of  bank  stock  as  security  ....  $15,000,  to  loan  on  bank  stock  at  5  per 
cent,  per  annum.' " — JOSEPH  G.  MARTIN,  Twenty -one  Tears  in  the  Boston  Stock 
Market,  p.  7. 

6  "  It  is  probably  well  and  very  well  to,  to  put  a  stop  to  the  way  we  are  going  on 
here  in  the  manner  we  are  making  loans." — Lenox  to  Biddle,  Jan.  22, 1836,  B.  P. 


LAST  DAYS  OP  THE  BANK  365 

that  month  the  city  suffered  severely  from  a  disastrous  fire, 
and  for  the  benefit  of  the  insurance  companies,  and  at  the 
request  of  the  merchants,  the  bank  opened  a  credit  of 
$2,000,000.1  A  further  increase  of  business  was  occasioned 
by  the  demand  for  the  bank's  notes  on  the  part  of  new  state 
banks  which  were  being  organized.2  This  would  account  for 
the  phenomenal  increase  in  its  circulation. 

On  the  whole,  the  directors  managed  their  affairs  in  a 
laudable  manner  all  through  1835,  and  were  clearly  busy 
setting  their  concerns  in  order  for  the  purpose  of  final 
settlement.  In  addition  to  the  transfer  of  funds  to  the  East 
from  the  distant  offices  by  the  means  of  exchange  operations, 
as  already  explained,  these  preparations  for  closing  up 
consisted  in  loaning  the  bank's  capital  at  long  dates  while 
selling  out  the  branches.  The  sale  of  the  branches  included 
the  disposal  of  the  active  debt,3  the  suspended  debt,  and  the 
real  estate,  including  the  banking  houses — in  fact,  everything 
that  the  bank  owned  in  these  branches  —  this  being  a  much 
more  expeditious  mode  of  settlement  than  for  the  bank  to 
attempt  to  collect  all  its  debts  itself.  Moreover,  it  would  be 
much  easier  for  the  community,  since  those  who  bought  the 
debt  would  continue  the  business  of  the  office,  whose  imme- 
diate closing  would  in  many  cases  have  occasioned  distress 
and  considerable  loss  both  to  the  community  and  to  the 
bank.*  The  property  was  for  the  most  part  sold  to  local 
banks  in  the  cities  or  towns  where  the  branches  were  estab- 
lished.5 Sometimes  the  active  debt  went  to  one,  the  sus- 
pended debt  to  another,  and  the  other  items  to  a  third.6 

Money  was  very  plentiful  early  in  1835,  and  the  bank 
took  the  opportunity  thus  afforded  to  collect  its  debts  in  the 

1  Biddle  to  Albert  Gallatin,  Dec.  21, 1835,  NILES,  Vol.  XLIX,  p.  307. 

»  Biddle  to  C.  A.  Davis  [Major  Downing],  June  5, 1835,  P.  L.  B.,  Vol.  V,  pp.  371, 372. 

3  This  is  frequently  what  is  meant  by  selling  the  office,t.  e.,  the  sale  of  its  active  debt. 

*  E.  L.  Colt  to  Biddle,  July  2  [1835],  B.  P. 

5 Ex.  Doc.  118,  24th  Cong.,  2d  Sess.,  pp.  105-7.          «  NILES,  Vol.  XLIX,  p.  181. 


366  THE  SECOND  BANK  OP  THE  UNITED  STATES 

way  described.1  It  began  the  sale  of  its  offices  as  early  as 
the  month  of  March,  when  orders  were  issued  to  the  branches 
at  Fayetteville,  Cincinnati,  Savannah,  Richmond,  Utica,  and 
Lexington  to  cease  making  new  loans.2  Washington  received 
similar  orders  in  April,3  and  Louisville  and  St.  Louis  in  May.4 
In  June  the  Hartford,  Utica,  and  Portsmouth  offices  were 
actually  closed,  Buffalo  and  Burlington  were  on  the  point 
of  closing,  while  the  nine  other  offices  above  mentioned  were 
rapidly  reducing  their  loans.5  Late  in  the  same  month  the 
office  at  Nashville  ceased  active  dealings,  though  it  is  worthy 
of  note  that  a  long  term  was  granted  it  in  which  to  put  its 
affairs  in  order.  It  was  to  cease  discounting;  its  old  debts 
were  to  be  settled  by  the  4th  of  March,  1836 ;  its  more  recent 
debts,  founded  on  bills  to  New  Orleans,  were  to  be  settled 
within  six  months  of  November,  1835 ;  and  the  office  was  to 
be  closed  on  the  1st  of  May,  1836.6  The  western  business 
was  evidently  to  be  settled  through  this  office,  which  was  to 
collect  and  remit  to  New  Orleans.  The  Lexington  branch 
had  arranged  to  close  up  its  affairs  in  August,7  while  the 
New  Orleans  office  was  instructed  in  October  to  cease  taking 
bills  on  the  West  or  on  Baltimore,8  and  this  order  probably 
marks  the  end  of  the  bank's  active  business  in  the  western 
and  southwestern  country. 

By  November  30,  1835,  the  bank  had  disposed  of  the 
active  debt  of  nine  branches.9  By  the  3d  of  April,  1836, 

1  NILES,  Vol.  XL VIII,  p.  128,  April  13, 1835. 

2  Biddle  to  the  presidents  of  these  offices,  March  24-8,  P.  L.  B.,  Vol.  V,  pp.  341-2. 

3  Biddle  to  the  president  of  the  Washington  branch,  April  3,  ibid. 
*  Biddle  to  the  offices,  May  4  and  29,  ibid.,  pp.  354,  367. 

5 " Portsmouth  and  Hartford  and  Utica  are  closed;  Buffalo  and  Burlington 
soon  will  be ;  while  Lexington,  Cincinnati,  St.  Louis,  Louisville,  Fayetteville,  Nor- 
folk, Washington,  Richmond  and  Charleston  are  under  a  process  of  reduction." — 
Biddle  to  C.  A.  Davis,  June  5,  ibid.,  p.  373. 

6  NILES,  Vol.  XLVin,  p.  310,  July  4, 1835,  quoting  a  Nashville  paper. 

TIbid.,  p.  410,  Aug.  15, 1835. 

8 Ibid.,  Vol.  XLIX,  p.  138,  Oct.  31, 1835,  quoting  the  New  Orleans  Union. 

9  These  were  Portsmouth,  Baltimore,  Fayetteville,  Buffalo,  New  Orleans, 
Natchez,  St.  Louis,  Cincinnati,  and  Charleston.— Ex.  Doc.  118,  24th  Cong.,  2d  Sess., 
p.  109. 


LAST  DAYS  OF  THE  BANK  367 

the  number  was  eighteen.1  Moreover,  three  offices  had  been 
closed  without  the  sale  of  their  assets.2  There  remained, 
therefore,  only  Boston,  New  York,  Savannah,  Nashville,  and 
the  mother  office  unsold,  and  these  were  rapidly  getting  their 
affairs  settled.  The  intention  in  the  case  of  Philadelphia, 
New  York,  and  Boston  was  not  to  sell  the  debts,  but  to  col- 
lect them,  as  this  could  be  done  more  advantageously  for  the 
bank.8  The  suspended  debt  in  the  South  would  be  collected 
at  Savannah  and  that  in  the  West  at  Nashville.  Meanwhile 
the  eastern  discounts  were  to  be  diminished,  Biddle  instruct- 
ing the  New  York  office  in  August  to  reduce  its  discounts,  to 
cease  the  collection  and  purchase  of  bills  on  the  western  and 
southwestern  offices,  to  stop  discounts  on  bank  stock  except- 
ing for  long  dates,  and  to  increase  its  supply  of  specie.4  A 
week  later  he  forwarded  like  instructions  to  Baltimore.5  In 
October,  however,  came  a  change,  the  stockholders  being 
encouraged  to  take  long  loans  on  their  stock  at  5  per  cent, 
interest,  in  order  to  keep  the  stock  together  "to  await  the 
contingency  of  an  incorporation  from  any  other  quarter."6 
This  is  the  first  intimation  in  Biddle's  correspondence  of  a 
new  policy  in  connection  with  the  project  of  securing  a  state 
charter.  Up  to  this  moment  the  bank  had  conducted  its 
affairs  apparently  with  no  intent  but  that  of  closing  up. 
"The  bank,"  wrote  Biddle  late  in  August,  "is  winding  up 
its  affairs,  quietly  and  certainly.  The  nature  of  its  opera- 
tions which  consist  mainly  in  selling  out  its  debts  on  long 
credits,  is  calculated  to  ease  the  debtors,  and  our  great  object 

1  Richmond,  Portland,  Lexington,  Providence,  Mobile,  Norfolk,  Burlington, 
Pittsburg,  and  Louisville. — Ibid. 

2  Hartford,  Utica,  Washington.— Ibid.,  p.  291,  Dec.  26, 1835,  quoting  the  National 
Gazette.    Miles  says  five,  but  is  in  error. 

3  Case  of  New  York,  Biddle  to  C.  A.  Davis,  Nov.  13, 1835,  P.  L.  B.,  Vol.  V,  p.  409 ; 
Boston,  same  to  Win.  Appleton,  Nov.  17, 1835,  ibid.,  p.  410. 

*  Biddle  to  Jaudon,  Aug.  7, 1835,  ibid.,  pp.  386,  387. 

5  Same  to  John  McKim,  Jr.,  Aug.  15, 1835,  ibid.,  p.  392. 

6  Biddle  to  W.  Hughlett,  Oct.  31, 1835,  ibid.,  circa  p.  400. 


368   THE  SECOND  BANK  OP  THE  UNITED  STATES 

is  to  close  its  concerns  in  such  a  manner  as  to  avoid  all 
pressure." l  Even  now  that  the  idea  of  a  new  charter  was 
seriously  adopted,  the  institution  varied  its  policy  but  little. 
Discounts  ceased  in  New  York  city  on  the  23d  of  January, 
1836;*  virtually  no  loans  were  made  at  any  of  the  other 
branches,  and  in  April  the  debts  at  Boston  were  being  col- 
lected so  rapidly  as  to  cause  much  distress.8 

The  ease  with  which  the  debts  were  collected,  the  facility 
with  which  the  offices  were  sold,  and  the  terms  at  which 
they  were  sold  furnish  conclusive  evidence  of  the  bank's 
condition.  The  sum  realized  by  the  sale  of  active  debts  up 
to  the  3d  of  April,  1836,  was  $15,716,726.53. 4  There  was 
no  difficulty  in  making  the  sales  at  good  prices  to  respon- 
sible parties,  the  debts  being  sold  "at  their  par  value, 
without  any  actual  deduction  for  the  risk  and  expense  of 
collection."5  Biddle  considered  "the  arrangements  .  .  .  . 
very  advantageous." '  The  branch  which  brought  the  highest 
sum  was  New  Orleans ;  next  came  Charleston,  and  after  that 
in  order  were  Baltimore,  Louisville,  Mobile,  and  Natchez.7 

As  a  rule,  cash  was  not  paid  for  these  debts,  but  instead 
promissory  notes  were  given,  secured  by  collateral.  The 
terms  were  usually  payment  in  four  years,  with  interest 
until  paid  at  from  4  to  6  per  cent.,  the  larger  part  of  the 
debt  bearing  5  per  cent,  interest.8  The  security  given  was 
generally  in  stocks  and  bonds,  frequently  the  stocks  or 

1  To  Silas  M.  Stilwell,  of  New  York,  Aug.  24, 1835,  P.  L.  B.,  Vol.  V,  p.  393. 

2  NILES,  Vol.  XL1X,  p.  387. 

3  President  William  Appleton  to  Biddle,  Boston,  April  7, 1836,  B.  P. 
*Ex.  Doc.  118,  24th  Cong.,  2d  Sess.,  p.  109. 

5  Report  on  the  debts  and  effects  of  the  Bank  of  the  United  States  on  March  3, 
1836,  government  commissioners  to  Secretary  Woodbury,  Jan.  25, 1837,  ibid.,  p.  19. 

6 To  John  McKim,  Jr.,  Aug.  15, 1835,  P.  L.  B.,  Vol.  V,  p.  392.  It  must  be  remem- 
bered that  these  were  for  "  active  debts  "  only ;  suspended  debt  would  be  sold  under 
other  arrangements,  or  collected,  while  bills  of  exchange  were  collected  by  the  bank. 

7  The  prices  paid  were  $3,500,000,  $2,073,645.61,  $1,339,776.46,  $1,100,000.  $1,095,446.79, 
and  $1,043,278  respectively. 

8  Out  of  $15,700,000,  $8,200,000  was  at  5  per  cent.— Ex.  Doc.  118,  24th  Cong.,  2d 
Sess.,  p.  109. 


LAST  DAYS  or  THE  BANK  869 

bonds  of  the  corporation  which  bought  the  debt.1  In  six- 
teen cases  the  sale  was  made  to  banks,  and  the  securities  of 
these  were  taken;  in  one  case  the  notes  of  individuals  were 
received,  and  in  one  case  the  purchase  money  was  paid 
down.2  The  misfortune  which  followed  this  disposal  of  the 
bank's  business  was  that  much  of  its  capital  was  thus  tied 
up  in  long  loans  for  from  one  to  twenty  years,  while  it  accu- 
mulated enormous  quantities  of  the  stock  of  various  institu- 
tions, which  it  would  have  been  better  off  without. 

Further  settlement  of  the  bank's  business  was  made  in  the 
items  of  "suspended  debt,"  "real  estate,"  and  "banking 
houses."  In  December,  1835,  the  bank  owned  real  estate, 
apart  from  its  banking  houses,  valued  at  $1,110,924.  By 
October  19,  1836,  the  corporation  had  sold  of  this  lands  and 
buildings  to  the  value  of  $356,258.3  In  these  transactions 
the  sale  of  banking  houses  is  not  included.  These  the 
institution  parted  with  at  a  slight  loss.  By  October,  1836,  it 
had  sold  all  but  seven,  receiving  from  the  purchasers  $640,- 
100  for  property  which  had  cost  $666,077.*  A  loss  of  $89,621 
was  calculated  to  result  at  the  sale  of  the  remaining  houses.5 

The  suspended  debt  amounted  to  $3,481,000  on  the  3d  of 
March,  1836.  It  was  much  increased  by  the  operations 
consequent  upon  the  settling  of  the  bank's  affairs.  For 
instance,  at  one  office  alone  $405,280  had  been  added  to  it,8 

i  Ibid.,  p.  101.  $1,761,100  on  stock  of  the  Bank  of  the  United  States.— Ibid., 
p.  104.  In  one  case  the  credit  given  -was  for  four,  five,  six,  and  seven  years  on  $250,- 
000  at  4  per  cent. ;  in  another,  twenty  years  on  $1,000,000  at  5  per  cent.— Ibid.,  p.  42. 
This  last  was  the  sale  of  the  Cincinnati  branch  to  the  Ohio  Life  and  Trust  Co.— Ibid., 
pp.  78, 106. 

2/fetd.,p.  109. 

3  Ibid.,  p.  117.    The  real  estate  was  expected  to  net  an  actual  gain  to  the  bank ; 
$1,532,000  was  estimated  to  bring  in  profits  amounting  to  $111,900.— Ibid.,  p.  115. 
*  Ibid.,  pp.  112, 113.  5  ibid.,  p.  112. 

6  This  sum  was  in  domestic  exchange. — P.  48.  It  is  worthy  of  note  that  the  items 
composing  the  "  suspended  debt "  were  mostly  bills  discounted,  and  not  bills  of 
exchange.  On  the  3d  of  Mapch,  1836,  the  account  was  as  follows : 

Bills  discounted  on  personal  security          ...       $2,672,693.97 
Bills  discounted  on  other  security   -----        498,851.98 

Domestic  bills  of  exchange 244,333.23 

Foreign  bills  protested 114,285.41 

Total $3,530,164.59 

—  Ibid.,  p.  92. 


370  THE  SECOND  BANK  OF  THE  UNITED  STATES 

and  at  another  $232,000.'  This  debt  was  far  from  being  a 
complete  loss.  For  example,  at  Lexington  the  Bank  of  Ken- 
tucky agreed  to  manage  and  collect  it  without  charge,2  while 
the  bank  calculated  that  out  of  the  whole  it  would  lose 
$1,297,979.3  Even  so,  however,  the  suspended  debt  of 
$3,481,285  would  be  worth  $2,183,306.  Suspended  debt 
and  real  estate  together  were  calculated  at  $6,822,000  in 
July,  1834,  while  by  July,  1836,  in  spite  of  many  additions 
to  the  items,  the  bank  had  diminished  the  whole  to  $4,427,- 
000.  In  other  words,  $2,355,000  had  been  secured  in  that 
time,  over  one-third  of  the  whole  original  amount.*  The 
showing  is  an  excellent  one. 

It  has  already  been  several  times  said  that  the  most  ques- 
tionable result  of  these  methods  of  closing  out  consisted  in 
the  creating  of  long  loans  on  stock  securities.  Many  of  the 
bills  of  exchange  were  also  taken  for  doubtful  debts  and  at 
long  terms.5  When  the  bank  ceased  doing  business  on  the 
3d  of  March,  1835,  the  bills  to  be  collected  amounted  to 
$16,413,144.26,  and  it  was  calculated  that  by  October  28, 
1836,  only  one-half  of  this  sum  was  paid.6  The  loans  on 
bank  stock  and  other  security,  moreover,  amounting  to  over 
$5,300,000,  had  all  been  renewed  with  slight  exceptions.7 
The  commissioners  for  the  bank  estimated  that  by  October 
28,  1836,  only  $22,727,000  had  been  collected  out  of  a  debt 
due  in  March  of  $54,890,000.8  Of  course,  it  must  be  re- 
membered that  most  of  the  sales  of  the  branches  were  on  notes 
due  only  in  one,  two,  three,  and  four  years.  Unhappily,  the 

i  Natchez.— Ex.  Doc.  118,  24th  Cong.,  2d  Sess.,  p.  124. 

2Biddle  to  John  Huske,  of  Fayetteville,  N.  C.,  Aug.  6,  1835,  P.  L.  B.,  Vol.  V, 
p.  386. 

3  Ex.  Doc.  118,  24th  Cong.,  2d  Sess.,  pp.  114, 115.  It  may  be  worth  while  to  remark 
that  the  item  of  suspended  debt  does  not  appear  in  the  bank  reports  before  March, 
1836.  It  must  therefore  be  entered  under  the  caption  of  bills  discounted.  On  the  sale 
of  suspended  debt  at  Cincinnati  the  bank  lost  $140,846. — Ibid.,  p.  53. 

*Ibid.,  pp.  118-25. 

5  "  At  other  offices,  bills  at  long  dates  were  taken  in  payment  of  doubtful  debts, 
and  are  not  yet  at  maturity."— Letter  of  the  Committee  of  the  Bank,  ibid.,  p.  48. 

6  Ibid.  1  Ibid.  8  ibid.,  pp.  47-9. 


LAST  DAYS  or  THE  BANK 


371 


actual  state  of  the  bank  is  considerably  obscured  by  the  fact 
that  the  corporation  continued  business  under  a  state  charter, 
without  opening  a  new  set  of  books,1  thus  making  it  im- 
possible to  disentangle  the  accounts  of  the  old  bank  from 
those  of  the  new. 

Several  conclusions,  however,  may  reasonably  be  drawn: 
the  bank's  affairs  were  in  good  order;  though  many  of  its 
debts  might  have  to  be  renewed,  the  vast  majority  of  them 
were  secured  by  business  firms  as  reputable  as  any  then 
existing  in  the  United  States ; 2  and  it  had  a  surplus  in  excess 
of  all  losses  of  $6,155,177  when  it  ceased  to  be  a  national 
bank.3  With  the  capital  stock  and  the  funds  due  stock- 
holders, the  books  showed  a  total  of  $70,500,000  of  first- 
class  assets  to  meet  outside  liabilities  of  a  little  over  $26,- 
000,000,  by  far  the  larger  part  of  which  was  circulation. 
The  specie  on  hand  was  $5,595,000.  The  bank  was  solvent, 
and  more  than  solvent;  it  was  prosperous.4  Its  profits  had 


i  Ibid.,  p.  42. 


2  See  the  list,  ibid.,  p.  105. 


3  Ibid.,  p.  129. 


*  State  of  bank,  March  3, 1836  (cents  omitted) : 


ASSETS 

Notes   discounted  and  bills 

of  exchange  -  -  -  $57,368,019 
Real  estate  and  banking 

houses 2,212,390 

Mortgages,  etc.  ...  101,449 
State  banks:  balances  and 

notes  due  ....  4,933,178 

Specie 5,595,077 

Deficiencies  ....  149,797 

Expenses  ....  166,803 


Totals $70,526,713 


LIABILITIES 

Capital 

Circulation    -       -       -       - 
Due  Barings      - 
Dividends  unclaimed  - 
Discount,  exchange,  and  in- 
terest   - 

Due  to  bank  and  offices     - 
Public  debt       - 
Due  depositors     - 
Profit  and  loss          - 
Foreign-exchange  account 
Fund  for  banking  houses 
Contingent  fund,  less  losses 
chargeable 


$35,000,000 

21,109,352 

371,777 

253,938 

1,105,647 
1,548,869 

120,622 
3,594,048 
3,765,032 

925,020 
1,104,223 

1,628,185 


$70,526,713 
—Ibid.,  p.  100. 

The  loss  and  estimated  loss  on  banking  houses,  Oct.  19,  1836,  was  $114,635.83. 
The  surplus  from  this  fund,  therefore,  was  $989,587.26.— Ibid.,  p.  112.  The  losses 
chargeable  to  contingent  fund  aggregated  $4,304,000.— Ibid.,  p.  88.  Most  of  this  was 
lost  during  the  administration  of  William  Jones.— H.  R.  460,  22d  Cong.,  1st  Sess., 
p.  217.  The  suspended  debt  amounted  to  $3,415,000.— Ex.  Doc.  118,  24th  Cong., 
2d  Sess.,  p.  87. 


372  THE  SECOND  BANK  OP  THE  UNITED  STATES 

been  large,  its  losses  small  during  the  administrations  of 
Langdon  Cheves  and  Nicholas  Biddle,  for  even  at  closing 
the  larger  part  of  the  losses  were  chargeable  to  the  adminis- 
tration of  William  Jones. 

Everything  seemed  to  be  in  the  way  of  final  settlement, 
but  unfortunately  the  bank  did  not  go  out  of  existence  at 
this  time ;  unfortunately  the  complete  settlement  of  its  affairs 
did  not  take  place.  The  project  of  a  Pennsylvania  charter 
was  started,  and  the  bank  immediately  ceased  its  preparations 
for  closing.1  This  was  the  end  of  the  whole  movement.  In 
February  the  bank  was  chartered  by  the  state  of  Pennsyl- 
vania, under  the  style  of  the  Bank  of  the  United  States  of 
Pennsylvania.  The  new  institution  went  on  under  the  old 
president,  became  the  trustee  of  the  defunct  corporation, 
whose  president  now  was  Mathew  Bevan,  reissued  the  notes 
of  the  old  bank,  and  continued  the  use  of  the  old  books, 
thus  involving  in  immense  difficulties  any  attempt  to  reach  a 
settlement.2 

The  consequence  was  serious,  for  there  was  one  stock- 
holder which  urgently  demanded  a  settlement,  and  whose  de- 
mands had  to  be  satisfied,  since  the  new  bank  went  on  with- 
out this  partner.  This  was  the  government  of  the  United 
States.  In  his  message  of  1834  Jackson  referred  to  the 
bank  as  "the  scourge  of  the  people,"  and  urged  a  settlement 
upon  Congress,  to  be  reached  by  selling  the  government 
stock.3  On  September  18,  1835,  Secretary  Woodbury  wrote 
Biddle,  asking  him  for  information  as  to  the  bank's  inten- 

1  Biddle  to  J.  W.  Webb,  Feb.  16, 1836,  B.  P. 

2  "The  difficulties  in  making  a  satisfactory  estimate  have  been  increased  by  the 
course  adopted  by  the  bank,  in  not  closing  its  concerns  on  the  3d  of  March  last,  at 
the  expiration  of  its  charter,  in  the  customary  manner ;  or,  at  least,  in  not  requiring 
new  books  and  accounts  to  be  opened  by  its  trustee,  and  in  not  retaining  or  cancel- 
ling its  redeemed  circulation,  instead  of  re-issuing  it  after  the  transactions  of  the 
bank  chartered  by  Congress  had  ceased." — Woodbury,  Ex.  Doc.  118, 24th  Cong.,  2d  Sess., 
p.  3.    Congress  specifically  repealed  the  14th  section  of  the  charter  in  June,  1836,  in 
order  to  put  an  end  to  any  responsibility  of  the  government  to  take  the  old  notes. — 
Statutes  at  Large,  Vol.  V,  p.  48,  c.  xcvii. 

3  Messages  and  Papers,  Vol.  Ill,  pp.  108, 109,  Dec.  1, 1834. 


LAST  DAYS  OF  THE  BANK  373 

tions  in  regard  to  reimbursing  the  government  for  its  shares 
in  the  capital  stock.1  Biddle  replied  that  nothing  had  yet 
been  decided  upon.2  The  president  in  his  annual  message 
for  1835  urged  Congress  to  begin  proceedings  to  bring  about 
a  settlement  with  the  bank,3  and  Congress  responded  by  an 
act  of  June  23,  1836,  appointing  Secretary  Woodbury  the 
agent  of  the  nation  with  full  powers  to  make  terms.4  Wood- 
bury  then  addressed  a  letter  to  President  Bevan  of  the  old 
Bank  of  the  United  States,  asking  for  information  and  the 
intentions  of  the  directors.5  The  secretary  was  referred  for 
an  answer  to  the  new  bank.6  In  September  Biddle  wrote 
Woodbury,  saying  that  a  commission  appointed  by  the  bank 
had  arranged  the  matter,  and  offering  to  submit  the  materials 
on  which  it  had  based  its  conclusions.7  The  commission  had 
been  appointed  to  evaluate  the  stock  without  a  word  to  the 
government  on  the  subject,  though  the  government  was  the 
party  most  interested.  The  calculation  reached  was  that  the 
stock  of  the  bank  was  worth  $111.47  a  share,8  an  estimate 
which  was  revised  so  as  to  make  the  value  $111. 87.9 

Commissioners  appointed  by  Secretary  Woodbury  believed 
that  the  correct  value  was  $115.58.10  The  bank  finally  offered 
to  pay  at  a  valuation  of  $113.44  a  share."  This  was  refused, 
and  here  negotiations  obstinately  stuck.  The  whole  amount 
of  stock  owned  by  the  United  States  at  the  time  was 
68,752  shares,  and  the  difference  involved  in  the  diverse 
estimates  of  the  government  and  the  bank  was  at  least 
$242,000."  The  secretary  of  the  treasury  had  hoped  to  get 

i  S.  D.  2,  24th  Cong.,  1st  Sess.,  p.  39.  2  Ibid. 

3  Messages  and  Papers,  Vol.  Ill,  p.  163,  Dec.  7, 1835. 
^Statutes  at  Large,  Vol.  Ill,  p.  56,  c.  cxvi. 
&Ex.  Doc.  118,  24th  Cong.,  2d  Sess.,  p.  28,  June  25, 1836. 

*  Bevan  to  Woodbury,  July  25, 1836,  ibid.,  inclosing  a  resolution  of  the  Bank  of 
the  United  States  of  that  date,  ibid.,  pp.  28, 29. 

7  Ibid.,  p.  29,  Sept.  10, 1836.  8  ibid.,  p.  83. 

« Ibid.,  p.  49.  10  Ibid.,  p.  18.  "  Ibid.,  p.  20. 

12  Woodbury's  report  to  Congress,  ibid.,  p.  2. 


374  THE  SECOND  BANK  OF  THE  UNITED  STATES 

about  $4,000,000  from  the  bank  in  1836.1  The  bank,  on 
the  other  hand,  declined  to  pay  anything  in  that  year, 
wishing  to  begin  payments  in  1838.2  Woodbury  was  dis- 
appointed, and,  in  sending  the  report  of  the  commissioners 
to  the  House,  censured  the  bank,  particularly  for  its  failure 
to  post  up  the  old  books  and  for  its  reissuing  of  the  old 
notes.3  Jackson,  who  had  not  once  failed  to  strike  at  the 
bank  in  his  annual  messages,  did  not  neglect  this  new  oppor- 
tunity, but  denounced  the  institution  for  its  delaying  to 
settle  with  the  government  and  for  its  reissue  "  of  the  notes 
of  the  expired  corporation" — an  act  "  sanctioned  by  no  law 
and  warranted  by  no  necessity."  * 

The  government  commissioners  had  offered  to  accept 
payment  for  the  stock  at  an  evaluation  of  $115.58  a  share, 
the  bank  to  pay  the  government  interest  at  6  per  cent,  until 
the  shares  were  paid  off.  Woodbury's  report  of  the  failure 
to  arrange  affairs  satisfactorily  had  been  made  on  January 
30,  1837.  On  February  24  of  the  same  year  the  president 
and  directors  of  the  Bank  of  the  United  States  presented  a 
memorial  to  the  government  petitioning  to  have  the  debt 
due  by  the  bank  to  the  United  States  liquidated.5  Biddle 
declared  that  the  reason  for  the  bank's  delay  in  settling  was 
mainly  due  to  the  stipulation  that  the  funds  retained  on 
account  of  the  French  indemnity  affair  should  be  surren- 
dered to  the  government.  He  asserted  that  the  bank  was 
ready  and  anxious  to  settle,  and  would  gladly  accede  to 
everything  that  the  secretary  of  the  treasury  had  demanded 
in  his  report.  "The  Board  of  Directors,"  he  concluded, 
"  agree,  at  once,  to  those  terms,  and  are  ready  to  carry  them 
into  execution."  '  Woodbury  rejoined  to  the  memorial  with 
bitter  sarcasm,  corrections,  and  an  exegesis  of  his  own.7 

1  Ex.  Doc.  118,  24th  Cong.,  2d  Sess.,  p.  1.  2  ibid.,  p.  18.  3  ibid.,  p.  3. 

•*  Messages  and  Papers,  Vol.  HI,  p.  252,  Dec.  5, 1836.       »  S.  D.  201, 24th  Cong.,  2d  Sess. 
6  Ibid.,  p.  3.  7  s.  D.  208,  24th  Cong,  2d  Sess.,  Feb.  27, 1837. 


LAST  DAYS  OP  THE  BANK  375 

Congress  on  the  3d  of  March  directed  the  secretary  to 
accept  the  bank's  offer.1  This  was  done.  Four  bonds  of 
the  bank,  payable  in  September,  1837,  1838, 1839,  and  1840 
at  6  per  cent,  interest,  were  taken  as  security  for  the  debt — 
the  sum  being  $7,866,145.49.  The  bank  redeemed  the  first 
two  bonds  at  "about  the  time  they  became  due."2  In  1838, 
as  a  consequence  of  the  commercial  panic,  the  secretary  of 
the  treasury  was  in  urgent  need  of  funds,  and  sold  the  third 
bond,  the  bank  being  the  purchaser.  It  was  the  irony  of 
fate  which  so  disposed  events  that  Van  Buren's  secretary  of 
war  was  forced  to  admit  that  the  purchase  of  the  bond  by 
the  bank  furnished  "the  only  means  by  which  a  failure  to 
meet  the  pecuniary  engagements  of  the  United  States,  or 
the  alternative  of  another  call  of  Congress  by  the  President, 
could  be  avoided." 3  The  fourth  bond  was  redeemed  in 
1840,  and  thus  the  government  finally  cleared  itself  of  its 
interest  in  the  bank,  which  was  left  to  run  its  disastrous 
course  under  its  Pennsylvania  charter. 

1  By  Joint  Resolution  No.  5,  March  3, 1837,  Statutes  at  Large,  Vol.  V,  p.  200. 

2  Woodbury's  report,  Dec.  24, 1838,  8.  D.  31,  25th  Cong.,  3d  Sess.,  p.  1. 

3  Poinsett  to  Van  Buren,  Jan.  11, 1839,  8.  D.  78,  25th  Cong.,  3d  Sess.,  p.  2. 


CHAPTER  XVI 

THE  BRANCHES  AND  THEIR  ADMINISTRATION 

THE  possession  of  branches  was  the  most  characteristic 
and  the  most  essential  feature  in  the  plan  of  the  first  and 
second  Banks  of  the  United  States.  Without  them  they 
would  have  been  virtually  useless  to  the  government ;  unable 
to  exercise  an  efficient  control  over  the  state  banks ;  inca- 
pable of  furnishing  accommodations  in  discounts  and  ex- 
change throughout  the  country;  unprovided  with  a  note 
circulation  of  uniform  value,  or  with  any  extended  currency. 
On  the  other  hand,  they  would  have  been  relieved  from  hos- 
tile contact  with  states  and  state  banks,  and  freed  from  the 
charge  of  unconstitutionality. 

The  charter  authorized  the  corporation  to  establish  offices 
anywhere  in  the  United  States  and  to  appoint  annually  the 
branch  directors,  who  were  to  number  not  over  thirteen 
nor  less  than  seven,  and  who  must  be  citizens  of  the  United 
States  resident  in  the  state  in  which  the  branch  was  located. 
They  were  empowered  to  appoint  one  of  their  number  presi- 
dent of  the  branch ;  one-fourth  of  them  were  to  retire  each 
year,  and  none  excepting  the  president  could  be  appointed 
for  more  than  three  years  in  succession.  The  central  direc- 
tory made  whatever  regulations  it  deemed  best  for  the  gov- 
ernment of  the  branches,  providing  that  they  were  not 
"contrary  to  law"  or  to  "the  constitution  of  the  Bank,"1 
while  the  treasury  must  deposit  its  funds  in  the  branches,  if 
such  existed  in  the  states  where  the  funds  were  collected.2 

1  Charter,  sec.  11,  Art.  14.    See  Appendix  I. 

2  Ibid.,  sec.  16.    But  the  secretary  of  the  [treasury  might  order  their  removal  if 
he  saw  fit.    He  must,  however,  give  his  reasons  to  Congress.    Other  stipulations  of 
little  moment  made  it  obligatory  upon  the  corporation  to  establish  a  branch  in  the 
District  of  Columbia  when  required  to  do  so  by  Congress,  and  in  any  state  where 

376 


THK  BRANCHES  AND  THEIR 


377 


for  directors  were  si 
central  board.     T 
wever  almost  wh 


the  bank,  t 
dty  of  its  polic 
?  branch  official 
The  making  of 
r'ernment  of  th 
f  the  first  boar 
rere  generous 
Certain  restriction 
)tes  were  to  be  di* 
han  sixty  days ; l  a 
,a  of  which  three-fourth 
overdrafts  were  forbidden 
made  on  personal  securit 


f  control  the  central  boar* 


Stars  on  the  map  indicate  defunct  branches. 


BBANCHES 

15. 

Louisville     -    - 

1817 

20. 

Hartford       - 

1824 

I. 

Philadelphia    -    1817 

16. 

Lexington    -    - 

1817 

21. 

Mobile  - 

1826 

2. 

New  York-    -    -    1H17 

17. 

Cincinnati    -    - 

1817 

22. 

Nashville 

1827 

1 

New  Orleans     -    1817 

(discontinued 

23. 

Portland 

1828 

4. 

Boston  -    -    -        1817 

1820;  re-estab- 

24. 

St.  Louis 

1829 

5. 

Portsmouth  - 

1817 

lished  1825,  to- 

86. 

Buffalo-    -    - 

1829 

6. 

Providence   - 

1817 

gether  •with  an 

26. 

Utica    -    -,,.-. 

1830 

7. 

Pittsburg-    • 

1817 

agency) 

27. 

Burlington    - 

1830 

8. 

Baltimore 

1817 

18. 

Chillicothe   -    - 

1817 

28. 

Natchez    -    - 

1830 

9. 

10. 

Washington  - 
Richmond     - 

1817 
1817 

(discontinued 
1825,  and  agency 

appoint  m 

AGENCIES 

11. 

Norfolk     -    - 

1817 

established) 

Chillicothe   - 

1825 

12. 

Fayettevflle  - 

1817 

19. 

Middletown  -    - 

1817 

Cincinnati     •    • 

1825 

13. 
H. 

Charleston    - 
Savannah  -    - 

1817 
1817 

(removed  1824  to 
Hartford) 

29. 

Macou  -    -    -  1830-34 

req 


THE  LOCATION  OF   THE  BBANCHES  AND  AGENCIES 


i  Kulet  and  Ret 
« Ibid.,  Art.  14. 


3/6id.,Art.l6.      «/6id.,Art.I7. 


ffice*,  Art.  12.  Beo  Appeudix  X. 
Ibid.,  Art.  IS.      » iftid..  Art.  4. 


the  mostl 
d  Banks  of 
i  have  been  virl 
ercise  an  effieie 
s  of  furnishing 

throughout  ti 
lation  of  uni. 

other  hand, 
ontact  with  at 

of  unconstil 

charter  aut 
here  in  the  \ 

directors,  wh 
ess  than  seven,  ai 

resident  in  the 
were  empowered 


ap 


•     Vr    '-     "i  - 


ion  of  rttiel  Ba 


lCaarMr.Me.il,  Art.  14.    DM  *| 


he  saw  fit.    Hemust,  howc' 
little  moment  made  it  obligator 
District  of  Columbia  when  requ 


'on^tress.  Otlier  stipulations  of 
poration  to  establish  a  branch  in  the 
kgr  Congress,  and  in  any  state  whero 


376 


THE  BRANCHES  AND  THEIR  ADMINISTRATION  377 

The  qualifications  for  directors  were  similar  to  those  for 
directors  of  the  central  board.  The  general  control  of  the 
branches  was,  however,  almost  wholly  in  the  power  of  the 
central  directorate  through  its  authority  to  appoint  the  local 
directors  and  to  create  by-laws  for  the  branches,  the  election 
of  president  being  the  one  important  privilege  left  to  the 
uncontrolled  will  of  the  branch  directorates. 

It  was,  of  course,  essential  to  the  safety  of  the  bank,  to 
the  security  of  its  operations,  and  to  the  unity  of  its  policy 
that  the  control  of  the  central  board  over  the  branch  officials 
and  directors  should  be  real  and  effective.  The  making  of  a 
body  of  rules  and  regulations  for  the  government  of  the 
offices  was  therefore  one  of  the  first  tasks  of  the  first  board 
of  directors.  These  rules  and  regulations  were  generous  in 
the  extent  of  the  power  they  granted.  Certain  restrictions, 
however,  were  imposed;  for  instance,  notes  were  to  be  dis- 
counted only  at  short  dates,  not  longer  than  sixty  days ; l  all 
notes  were  to  be  laid  before  the  board,2  of  which  three-fourths 
must  consent  to  the  discount;3  overdrafts  were  forbidden;4 
and  discounts  were  not  to  be  made  on  personal  security 
"without  two  responsible  names." 5 

To  secure  a  larger  measure  of  control  the  central  board 
retained  in  its  own  hands  the  power  of  appointing  the 
cashiers  of  the  offices,6  these  being  the  most  important  offi- 
cials and  sometimes  the  only  ones  thoroughly  versed  in 
correct  banking  methods.  Consequently  the  power  to  ap- 
point them  was  the  principal  means  by  which  effective  control 
over  the  offices  could  be  exercised.  If  the  board  at  Phila- 
delphia used  discretion  in  these  appointments,  it  could 
undoubtedly  keep  a  firm  hold  upon  the  branches  by  select- 
ing cashiers  known  to  it,  who  had  the  interests  of  the  cor- 

2,000  shares  were  held,  if  the  state  legislature  requested  it  and  Congress  by  law 
required  it.— Ibid.,  sec.  11, 14th  fundamental  article,  Appendix  I. 

i  Rules  and  Regulations  for  the  Government  of  the  Offices,  Art.  12.  See  Appendix  X. 

2/6id.,Art.l4.      3 /bid..  Art.  16.      *J6»d.,  Art.  17.     6  ibid.,  Art.  15.      6/6£d.,  Art.  4. 


378  THE  SECOND  BANK  OF  THE  UNITED  STATES 

poration  at  heart  and  were  competent  and  conservative 
bankers. 

To  increase  its  hold  upon  the  cashier,  the  board  carefully 
defined  his  duties.  He  was  to  exercise  supervision  over  all 
the  subordinate  officials,  "  examine  the  settlement  of  the 
cash  account  of  the  office;  take  charge  of  the  cash,"  attend 
all  board  meetings,  keep  the  minutes,  report  to  his  board  all 
cases  of  neglect  or  incapacity  among  his  subordinates,  and 
hold  himself  at  the  disposal  of  the  board  for  consultation, 
the  furnishing  of  information,  and  what  other  services  were 
"  required  of  him."  *  Moreover,  he  was  the  usual  channel 
through  which  instructions  came  from  the  parent  office. 
Consequently  he  might  exercise  the  utmost  influence  in 
determining  the  character  and  amount  of  business  trans- 
acted. The  branch  cashiers,  in  short,  were  treated  as  execu- 
tive officers  of  the  central  board,  as  well  as  of  the  branch,  and 
constituted  the  efficient  links  in  the  system  of  branch  banks. 
The  other  local  officers  were  appointed  by  the  local  board.2 

To  exercise  efficient  and  intelligent  control,  the  central  di- 
rectorate needed  not  only  authority  over  the  branches,  but 
complete  information  about  them.  For  this  purpose  "  weekly 
statements  of  the  affairs  of  each"  were  "made — monthly  re- 
turns" were  "made  —  sixty  day  returns"  were  "made  — 
quarterly  examinations"  were  "made  —  and  in  addition  to 
all  these  an  inspection  not  anticipated,  at  uncertain  times — 
and  with  no  notice,"  was  "made  by  officers  immediately 
deputed  from  the  Bank;"3  while  every  quarter  a  committee 
of  each  of  the  branches  investigated  its  affairs,  scrutinizing 
the  debts  and  reporting  upon  them.  The  lists  furnished  by 
the  branches  were  detailed  enough  to  show  whether  they  en- 
gaged in  discounting  paper  which  took  the  form  of  perma- 

1  Rules  and  Regulations  for  the  Government  of  the  Offices,  Art.  5.  See  Appendix  X. 

2  Biddle,  H.  R.  460,  22d  Cong.,  1st  Sess.,  p.  315. 

3  Biddle  to  A.  H.  Tracey,  March  3, 1830,  P.  L.  B.,  Vol.  Ill,  p.  198.    See  also  H.  R. 
460,  22d  Cong.,  1st  Sess.,  p.  315. 


THE  BRANCHES  AND  THEIR  ADMINISTRATION  379 

nent  loans,  or  allowed  the  constant  drawing  and  redrawing 
of  bills.1  The  officers  sent  out  from  the  parent  office  to 
examine  the  branch  accounts  were  experts,  capable  of  de- 
tecting errors  or  frauds  at  once.  The  parent  board  also  pre- 
pared and  furnished  all  the  notes  issued  by  the  branches, 
and  might  therefore  limit  the  branch  issues  and  diminish 
the  branch  discounts  at  any  time  by  declining  to  furnish  any 
further  supply  of  notes.  All  in  all  the  board  at  Philadel- 
phia could  exercise  a  very  real  and  a  very  extensive  control 
over  the  branches. 

Did  it  exercise  such  control?  Under  the  administration 
of  William  Jones  it  certainly  did  not.  The  extensive  estab- 
lishment of  branches  under  his  presidency  was  in  itself  an 
ominous  sign  of  loose  management.  Eighteen  offices  were 
erected  in  1817 — a  number  much  too  large.2  In  some  cases, 
too,  the  locations  were  badly  selected  and  in  defiance  of  correct 
banking  principles.  Thus  the  new,  thinly  settled,  and  poor 
western  states  had  as  many  offices  as  the  whole  of  rich  and 
populous  New  England  or  the  middle  states.  There  could  be 
no  possible  justification  for  so  numerous  a  supply  of  branches 
in  these  agricultural  communities,  in  most  parts  of  which 
genuine  banking  transactions  were  hardly  possible  to  any 
extent,  where  borrowers  constantly  demanded,  not  bank 
credits,  but  long  loans,  and  where  the  security  offered  fre- 
quently had  to  take  the  form  of  real  estate.  Many  of  the 
other  branches  were  not  skilfully  placed.  Among  these  may 
be  named  those  at  Fayetteville,  N.  C.,  Portsmouth,  N.  H., 
and  Middletown,  Conn. 

The  directors  in  the  early  years  of  the  bank  were  at 
fault,  not  only  in  locating  offices,  but  in  managing  them. 

1  J.  Lippincott's  testimony,  Feb.  4, 1833,  H.  R.  121,  22d  Cong.,  2d  Sess.,  p.  58. 

2  Secretary  Crawford  says  that  twenty  offices  were  established  by  April,  1818,  and 
mentions  one  at  Augusta,  Ga.,  which  would  probably  be  abandoned  on  account  of  the 
lack  of  ability  to  supply  it  with  notes.— To  Senate  Finance  Committee,  April  7,  1818, 
A.  o/C.,  15th  Cong.,  1st  Sess.,  Vol.  I,  pp.  353,  354. 


380  THE  SECOND  BANK  OP  THE  UNITED  STATES 

The  plan  of  government  noted  above  was  not  thoroughly 
worked  out  until  the  administration  of  Nicholas  Biddle,  and 
under  Jones  but  little  efficient  control  was  exercised.  The 
executive  officers  at  Philadelphia  were  too  incompetent  and 
too  anxious  to  make  fortunes  to  require  strict  obedience 
from  the  branches;  the  officers  of  the  branches  were  inca- 
pable, with  little  or  no  knowledge  of  banking  methods ;  while 
the  business  which  they  were  permitted  to  transact  inevitably 
took  the  form  of  semi-permanent  loans  made  to  agricul- 
tural interests.  Finally,  Jones's  conception  of  branch  man- 
agement was  faulty.  He  thought  that  specific  capitals  ought 
not  to  be  assigned  to  offices,  because  it  was  the  intention  of 
the  central  board  "  to  extend  or  control  their  operations,  as 
the  exigencies  of  commerce,  ....  and  the  general  interest 
of  the  institution "  should  "  from  time  to  time  direct."  * 
This,  Jones  thought,  was  managing  the  institution  as  a  unit, 
"  integral  in  its  organization,  ....  indivisible  in  its  inter- 
ests." 3  But  the  supposed  unity  actually  meant  complete 
disintegration,  since  strict  and  competent  supervision  was 
wanting.  The  result  was  enormous  loss.  The  story  of  the 
looting  of  the  Baltimore  office  and  of  the  piling  up  of  sus- 
pended debt  at  the  southern  and  western  branches  is  elo- 
quent testimony  to  the  inefficiency  and  impotency  of  the 
Jones  administration  both  at  the  central  office  and  at  the 
branches. 

As  soon  as  Cheves  became  president  he  struck  at  the  root 
of  the  disorder  by  recovering  the  capital  and  then  apportion- 
ing fixed  capitals  to  the  offices.  To  accomplish  these  ends  he 
held  the  branches  in  check  with  an  iron  grasp.  The  issue 
of  southern  and  western  branch  paper  was  reduced,  and  in 
some  instances  totally  suppressed,  while  the  other  transac- 
tions of  these  offices  were  materially  reduced;  the  Cincin- 

1  Jones  to  Charleston  branch,  Feb.  6, 1818,  F.,  Vol.  Ill,  p.  335. 

2  Jones  to  Savannah  branch,  Dec.  5, 1817,  ibid. 


THE  BRANCHES  AND  THEIR  ADMINISTRATION  381 

nati  branch  was  discontinued;  the  boards  were  reorganized 
and  many  officials  dismissed,  committees  appointed  by  the 
central  board  investigated  the  affairs  of  the  branches,  while 
a  plan  was  formulated  by  which  the  capitals  of  the  branches 
were  kept  stationary.1  When  Cheves  resigned,  the  offices 
were  fairly  under  control,  but  the  business  done  by  them 
scarcely  justified  their  existence,  and  the  advantages  of  a 
uniform  currency  were  almost  destroyed  by  the  limitations 
placed  upon  the  issues.  Cheves  pointed  out  the  essential 
defect  of  the  bank's  organization  as  existing  in  the  character 
of  the  local  directories,  and  he  advised  the  strict  execution 
of  the  orders  of  the  parent  board,2  the  payment  of  good 
salaries  to  the  presidents,  the  permanent  reduction  of  the 
bank's  active  capital,'  and  the  diminution  of  the  number  of 
the  branches.  He  was  positive  that  these  were  the  only  safe 
measures  to  pursue.4 

It  is  these  early  years  which  furnish  evidence  that  the 
western  branches  were  political  machines,  or  at  least  sub- 
ject to  the  influence  of  politicians  who  acted  as  directors,6 

1  See  chap.  iv. 

2 "That  the  President  and  Directors  of  the  Parent  Bank  keep  steadily  in  view 
the  absolute  necessity  of  enforcing  its  own  orders  through  all  the  various  depart- 
ments of  the  institution;  without  which,  neither  harmony  can  be  expected  in  its 
administration,  nor  security  to  the  interests  of  its  stockholders." — Report  of  Com- 
mittee of  Stockholders,  Oct.  1, 1822,  CHEVES,  p.  10,  and  NILES,  Vol.  XXIII,  p.  89. 

3  CHEVES,  p.  30. 

*"I  am  perfectly  satisfied  that  with  the  present  organization  of  the  Bank  it  can 
never  be  managed  well.  We  have  too  many  branches,  and  the  directors  are  fre- 
quently governed  by  individual  and  local  interests  and  feelings.  For  a  time  we 
must  bear  with  the  branches,  but  I  hope  they  will  be  reduced,  and  I  hope  the  presi- 
dents may  be  made  to  devote  their  whole  time  to  the  business,  engage  in  no  other 
business,  and  receive  a  very  liberal  salary,  which  would  make  them  value  their 
Offices  and  be  afraid  of  losing  them.  A  different  management  of  several  offices 
would  in  the  business  of  each  have  saved  and  gained  more  than  would  have  paid 
five  thousand  dollars  per  year  to  each  president  of  the  branches.  Nay,  there  is  no 
calculating  the  actual  loss  and  the  loss  of  gain  the  Bank  has  sustained  by  the  want  of 
competent  and  confidential  men  at  the  head  of  the  branches." — Cheves  to  Crawford, 
May  27, 1819,  Exposition,  p.  73 ;  and  Report  of  the  Committee  of  Stockholders,  Oct.  1, 
1822,  ibid.,  p.  11. 

5"!  am  disposed  to  think,  that,  unless  it  is  placed  in  the  hands  of  political 
partisans,  as  it  was  once  before,  that  much  of  the  losses  sustained  there  will  be 
recovered."— Tilford  to  Biddle,  Lexington,  Jan.  30, 1829,  S.  D.  17,  23d  Cong.,  2d  Sess., 


382  THE  SECOND  BANK  OP  THE  UNITED  STATES 

and  made  large  loans  to  political  friends.  This  was  particu- 
larly the  case  in  Kentucky.1  In  this  matter  it  was  Cheves's 
wish  and  endeavor  to  withdraw  the  branches  from  such  in- 
fluences, though  apparently  he  did  not  entirely  succeed. 

Cheves's  recommendations  to  diminish  the  number  of  the 
offices  and  to  retain  the  bank's  stock  forfeited  to  it  in  con- 
sequence of  the  frauds  at  Baltimore  and  other  offices,  in 
order  to  decrease  the  size  of  the  capital,  proved  that  he  de- 
spaired of  establishing  any  efficient  control  over  the  branches, 
since,  relatively  to  the  capital  of  the  bank,  no  one  could  have 
argued  that  they  were  too  numerous.  All  the  evils  incident 
to  their  management  under  Jones  were  not  corrected,  and 
probably  could  not  be  in  the  time  Cheves  had  at  his  dis- 
posal. The  affairs  of  the  western  branches  were  infinitely 
confused  by  the  enormous  amounts  of  real  estate  thrown 
upon  them  in  discharge  of  bad  debts,  and  by  the  attempt  to 
collect  from  hundreds  who  refused  to  pay  even  in  real  estate. 
Continuous  litigation  was  carried  on;  the  branches  did  little 
or  no  business,  and  the  conflict  with  the  states  absorbed 
much  time  and  energy.  The  president  and  cashier  at 
Savannah  allowed  overdrafts  and  engaged  in  other  repre- 
hensible practices  without  the  knowledge  of  the  local  board.2 
The  entire  business  of  the  Georgia  office  had  finally  to  be 
suspended  until  the  difficulties  with  the  state  and  the  state 

p.  306.  "  His  name  and  character  were  well  known  to  the  bank  in  former  times,  hav- 
ing served  several  years  as  a  director  previous  to  1822.  So  devoted  to  politics,  that 
all  his  views  as  a  director,  ....  were  directed  to  the  policy  of  the  Government  as 
connected  with  the  bank,  and  not  to  the  interests  of  the  stockholders.  Always 
ambitious  of  being  a  leader  of  a  party,  he  produced  factions  in  the  board,  and 

measures  were  advocated  and  opposed  from  party  feeling  alone Many  of 

the  difficulties  and  losses  of  this  office  may  be  attributed  to  him." — Shippen,  regard- 
ing Warden  Pope,  to  Biddle,  Jan.  24, 1829,  ibid.,  p.  301. 

1 "  In  your  section  of  the  country  we  have  surely  had  a  melancholy  experience 
of  the  hazard  of  lending  to  politicians." — Biddle  to  J.  Harper,  Jan.  9, 1829,  8.  D.  17, 
23d  Cong.,  2d  Sess.,  p.  298. 

"  That  the  offices  in  Kentucky  had  suffered  deeply  from  the  influence  of  politi- 
cians ;  that  we  had  for  some  time  been  endeavoring  to  withdraw  the  bank  out  of  the 
reach  of  that  influence ;  that  we  had,  at  length,  succeeded  in  giving  a  business  char- 
acter to  its  transactions." — Biddle  to  Shippen,  Feb.  12, 1829,  ibid.,  p.  304. 

2S.  Nicholas  to  Biddle,  Savannah,  Feb.  26, 1821,  B.  P. 


THE  BRANCHES  AND  THEIR  ADMINISTRATION  383 

banks  were  accommodated,1  which  did  not  occur  until  the 
decision  of  the  Supreme  Court  in  the  case  of  the  Bank  of  the 
United  States  vs.  the  Planters'  Bank  of  Georgia  and  the  con- 
sequent repeal  in  1824  of  the  Georgia  law  hostile  to  the 
bank.2  Politics  still  influenced  the  choice  of  directors,  cashiers 
were  not  selected  judiciously,  and  frauds  frequently  resulted 
as  a  consequence.3  The  offices  were  still  unmanageable  to  a 
considerable  extent,  while  "a  sufficient  knowledge  of  the 
accounts  between"  them  was  still  wanting.* 

When  Nicholas  Biddle  became  president  of  the  bank,  the 
safe  business  methods  inaugurated  by  Cheves  were  con- 
tinued, but  a  more  effective  means  of  control  and  an  expan- 
sion of  business  were  also  desired.  In  brief,  Biddle's 
measures  consisted  in  extending  the  transactions  of  the 
large  eastern  offices;  prohibiting  the  issue  of  state-bank 
notes;  forbidding  loans  on  long-term  paper  and  mortgages, 
renewals,  and  the  making  of  loans  by  small  committees; 
while  dealings  in  exchange  were  extended  at  all  the  offices, 
and  the  bank's  notes  were  freely  circulated  and  redeemed 
everywhere.  It  was  not  until  1827,  however,  that  Bid- 
die  put  the  finishing  touches  to  his  schemes  for  expansion, 
by  the  invention  of  branch  drafts  and  a  larger  participa- 
tion in  inland  exchange.  This  was  Biddle's  final  plan  for 
safe  and  extensive  dealings,  which  kept  the  capital  of  the 

1 "  I  believe  its  not  doing  any  business.  Not  a  single  deposit  is  made  in  it  nor  do 
they  discount  a  dollar  but  in  renewal  of  paper  as  no  one  offers  any  paper  there  from 
the  entire  inability  to  make  payments  into  it."  The  branch  had  done  nothing  for  a 
year.— S.  Nicholas  to  Biddle,  Savannah,  Jan.  14, 1822,  ibid. 

2 "The  repeal  and  the  decision  of  the  court  having  opened  the  way  to  the 
re-establishment  of  the  office  and  the  investment  of  a  portion  of  the  capital  of  the 

Bank  in  Georgia " — Biddle   to  John  Gumming,  president  of  the  Savannah 

branch,  Jan.  12, 1825,  P.  L.  B.,  Vol.  I,  pp.  196, 197. 

3  The  cashier  at  New  Orleans  defrauded  the  bank  in  1825.  He  was  an  old 
appointee.  The  cashier  at  Middletown,  Conn.,  plundered  the  branch  there  in  1820. 
The  cashier  at  Richmond  was  also  delinquent.  The  president  of  the  Portsmouth 
branch  appropriated  the  pension  funds  in  1824.  The  bookkeeper  at  Charleston  was 
guilty  of  peculation  in  the  same  year. 

*  Biddle  to  John  McKim,  of  Baltimore,  March  14, 1826,  P.  L.  £.,  Vol.  II,  p.  140. 


384  THE  SECOND  BANK  OF  THE  UNITED  STATES 

bank  localized,  and  it  was  one  which  he  always  regarded  with 
pride  and  satisfaction. 

His  plan  of  stricter  control  consisted  in  securing  the  ap- 
pointment of  the  presidents  of  the  branches  by  designating 
to  the  local  boards  the  men  whom  the  central  directory  wished 
elected  to  that  office,  Biddle  declaring  that  unless  the  boards 
did  appoint  as  directed,  the  central  board  would  find  a  rem- 
edy by  leaving  off  the  local  directorates  presidents  chosen  in 
opposition  to  its  will;1  directors  of  the  parent  board  living 
outside  of  Philadelphia  were  authorized  to  sit  at  the  board 
of  the  branches  which  might  be  located  in  their  cities;  offi- 
cial advisers  were  chosen  at  the  different  offices ;  the  cashiers 
of  the  branches  were  carefully  selected  from  the  employees 
trained  at  Philadelphia,  made  responsible  to  the  central 
board,  and  required  to  furnish  information  to  that  board  and 
to  the  other  branches;  large  borrowers  were  excluded  from 
the  directorates;  and,  finally,  assistant  cashiers  were  ap- 
pointed at  Philadelphia,  whose  duties  were  exclusively  con- 
fined to  the  management  of  the  bank's  suspended  debt  and 
real  estate  and  to  the  business  of  the  offices.2  The  results 
were  gratifying.  There  is  no  instance  known  of  peculation  by 
cashiers  appointed  during  Biddle' s  presidency;  the  control 
of  the  offices  was  fairly  efficient,  and  their  business  was  con- 
fined to  safer  channels,  even  while  it  was  largely  expanded. 

Biddle' s  success  led  to  the  establishment  of  a  number  of 
new  branches  during  his  presidency.  From  1817  to  1826 
there  had  not  been  a  single  new  branch  created,  while  that 
at  Chillicothe  had  been  discontinued.  From  1826  to  1831 
eight  new  branches  were  established:  two  in  the  Southwest,8 
two  in  the  West,*  two  in  New  England,5  and  two  in  the  mid- 
dle states.6  These  localities  were  carefully  selected.  The 

1  Biddle  to  S.  Wharton,  of  Providence,  Sep.  19, 1826,  P.  L.  B.,  Vol.  I,  pp.  183-6. 

2  See  chap,  v,  "  Nicholas  Biddle  and  His  Policy,  1823-28." 

3  Mobile,  1826 ;  Natchez,  1821.  *  Nashville,  1827 ;  St.  Louis,  1829. 
&  Portland,  Me.,  1828 ;  Burlington,  Vt.,  1830.          6  Buffalo,  1829 ;  Utica,  1830. 


THE  BRANCHES  AND  THEIB  ADMINISTRATION  385 

southwestern  offices  secured  the  business  beginning  in 
the  new  cotton-growing  country,  and  were  established  for 
that  purpose,  while  in  the  West  the  phenomenal  growth  of 
wealth  and  population  justified  the  additional  offices.  Criti- 
cisms may  be  directed  against  their  establishment  because 
the  loans  in  these  sections  would  necessarily  be  made  to  per- 
sons engaged  in  agriculture  and  consequently  apt  to  become 
semi-permanent.  In  both  instances  the  wishes  of  the 
treasury  were  considered,  the  secretary  having  urged  the 
opening  of  offices  at  Mobile  and  at  St.  Louis.1  In  the  cases 
of  Buffalo  and  Utica  the  increased  trade  due  to  the  naviga- 
tion of  the  Great  Lakes  and  the  opening  of  the  Erie  Canal 
was  sufficient  warrant  for  the  selection ;  the  trade  with  Canada 
justified  the  choice  of  Burlington;  while  the  office  at  Port- 
land was  opened  at  the  solicitation  of  the  treasury.2  Be- 
fore establishing  these  various  branches,  the  central  board 
sent  special  agents  to  make  careful  examination  of  the  sites 
in  relation  to  their  convenience  to  the  government  and  the 
amount  of  trade  which  centered  about  them.3 

Notwithstanding  the  improved  methods  introduced,  there 
were  still  occasions  when  the  control  of  the  central  board  was 
not  effective.  Necessarily  much  power  had  to  be  given  to  the 
executive  officers  of  the  branches.  For  instance,  the  president 
and  cashier  of  an  office  were  given  complete  authority  in  the 
purchase  of  foreign  bills,  and  a  veto  upon  the  purchase  of 
inland  exchange.4  Indeed,  in  the  early  years  of  Biddle's 
administration  the  branch  directorates  were  given  entire 
control  of  all  questions  relating  to  exchange.  Either  this 
discretion  had  to  be  confided  to  them,  or  a  certain  amount 
of  capital  for  investment  in  bills  put  at  their  disposal,  or  the 

1 8.  D.  17,  23d  Cong.,  2d  Sess.,  p.  225.  2  Ibid. 

3  For  examples  of  the  thoroughness  of  such  examinations  see  ibid.,  additional 
documents. 

*"You  and  the  President  have  confided  to  you  the  exclusive  purchase  of 
foreign  bills,— and  an  absolute  negative  on  domestic  bills." — Biddle  to  Cashier 
West,  of  New  Orleans,  May  17, 1823,  P.  L.  £.,  Vol.  I,  p.  28. 


386  THE  SECOND  BANK  OP  THE  UNITED  STATES 

central  board  must  give  minute  instructions  in  regard  to 
purchases.  It  was  found  inexpedient  to  give  a  general  credit 
on  which  to  trade,1  while  the  central  board  could  not  give 
the  necessary  instructions  with  regard  to  purchases  without 
a  much  more  intimate  acquaintance  with  the  state  of  busi- 
ness in  the  neighborhood  of  the  offices  than  could  be  possessed 
by  it.  Later  the  plan  was  adopted  of  instructing  the 
offices  as  to  the  rates  to  be  charged  and  the  nature  of  the 
bills  to  be  taken,  and  an  officer  of  the  central  board  was  ap- 
pointed to  supervise  exchange  dealings.  Even  so  late  as 
1829,  however,  the  claim  of  a  branch  to  fix  its  rate  of  ex- 
change was  admitted,  and  the  Savannah  office  insisted,  in 
flat  opposition  to  the  wishes  of  the  parent  board,  upon  the 
management  of  its  inland  exchange  business.2 

Similarly,  in  the  making  of  discounts  a  large  discretion 
had  to  be  granted.  The  bank  fixed  the  capital  of  each 
branch,  but,  having  done  that,  could  not  dictate  the  precise 
loans  which  should  be  made  by  it.  It  prohibited  long  loans 
and  those  on  real-estate  security,  but  within  these  limita- 
tions the  offices  were  supposed  to  control  their  own  loans. 

l "  The  question  of  general  credits  by  the  Bank  to  the  Southern  offices  has  often 
been  discussed,  and  after  some  experience  it  was  found  best  not  to  continue  them. 
The  general  theory  on  that  subject  is  to  leave  the  office  as  far  as  possible  perfectly 
free,  to  give  it  the  command  of  the  Bill  market,  and  let  it  judge  of  the  time  and 
manner  and  rate  of  purchasing  its  bills.  Where  credits  were  given,  the  office  was 
more  or  less  obliged  to  buy  the  bills,  and  even  where  the  office  did  not,  the  knowl- 
edge of  the  fact  that  the  credit  was  lodged  with  the  office  enabled  the  party  to  dis- 
pose of  his  bills  out  of  doors  at  a  higher  rate  than  the  office  would  be  willing  to  have 
given — thus  using  the  credit  of  the  Bank  to  its  own  disadvantage." — Biddle  to  B. 
Gilmor,  Baltimore,  Dec.  19, 1823,  P.  L.  X.,  Vol.  II,  p.  82. 

2  The  branch,  despite  instructions  from  Philadelphia,  had  resolved  to  take 
checks  on  the  North  at  par,  in  liquidation  of  state-bank  balances. — Q.  B.  Cum- 
mings  to  Biddle,  Savannah,  Dec.  24, 1828,  B.  P. 

"  The  fact  is,  that  I  was  surprised  at  the  course  of  the  Board,  and  have  been  so 
unwilling  to  trust  myself  with  any  observations  on  it,  that  this  is  the  very  first  time, 
I  have  ever  attended  [alluded?]  to  it,  except  to  the  members  of  the  Parent  Board. 
The  change  which  it  made  in  the  policy  of  the  office  with  regard  to  exchange,  was 
obvious  —  the  surrender  of  the  whole  question,  which  it  involved  was  painful  —  yet, 
recognizing  as  we  do,  the  right  of  the  Board,  to  fix  its  rates  of  exchange,  it  was 
thought  better  not  to  interpose  for  the  present,  but  to  watch  the  progress  of  the 
system  which  the  Board  adopted."— Biddle  to  George  B.  Cummings,  of  Savannah, 
Feb.  6, 1829,  P.  L.  B.,  Vol.  Ill,  pp.  3,  4. 


THE  BRANCHES  AND  THEIR  ADMINISTRATION  387 

This  was  unavoidable,  and  indeed  there  could  be  little  excuse 
for  separate  branch  directorates  on  any  other  basis,1  and 
though  the  central  board  appointed  all  the  branch  directors, 
it  could  not  know  them  all,  nor  even  any  considerable  num- 
ber of  them.2  Indeed,  though  Biddle  took  advice  about  the 
qualifications  of  candidates,  whenever  he  could  get  it,  the 
board  had  finally  to  depend  mostly  upon  the  opinion  of  the 
executive  officers  of  the  branches.3 

It  was  consequently  of  vast  importance  that  the  executive 
officers  should  be  honest  and  capable.  While  these  qualities 
were  usually  assured  in  branch  cashiers  by  the  methods 
already  explained,  there  was  always  a  doubt  in  the  case  of 
branch  presidents,  who  could  not  in  all  cases  be  well  known 
to  the  managers  at  Philadelphia.  Moreover,  though  the 
presidents  were  salaried,  the  sum  paid  was  in  most  cases  too 
meager  to  secure  first-class  talent.  Consequently  extreme 
losses  might  and  did  occur,  as  a  result  of  the  inefficiency 
or  dishonesty  of  these  officers.  Thus  the  president  of  the 
Portsmouth  branch  secured  complete  control  there,  used 
his  power  to  defraud  the  government  of  $20,000,  and 
remained  undisturbed  until  his  death  in  1824  revealed  the 

1 "  I  do  not  think  it  judicious  nor  safe  for  the  Board  here  to  say  to  a  Distant 
Board  '  Proceed  to  Discount  as  liberally  as  if  the  failure  of  Mr.  A.  and  Mr.  B.  had 
not  occurred.'  It  is  our  business  to  direct  the  general  state  of  the  operations  of  an 
Office,  but  as  we  cannot  estimate  the  effect  which  failures  may  have  over  the  persons 
connected  with  the  office  it  would  be  hazardous  to  give  directions.  The  discretion 
must  be  left  to  the  local  Directors." — Biddle  to  P.  P.  F.  Degrand,  of  Boston,  June  22, 
1826,  ibid..  Vol.  II,  p.  171. 

2  Biddle,  in  writing  to  James  Lloyd  of  the  candidates  for  the  presidency  at 
Washington,  says :    "  Of  all  these  gentlemen,  there  is  no  one  with  whom  I  have  the 
slightest  acquaintance."— Dec.  21, 1823,  ibid.,  Vol.  I,  p.  85. 

3  "  In  the  Branches  we  naturally  look  to  the  confidential  officers  of  the  Bank 
(the  Cashier  who  is  appointed  by  the  Parent  Board,  and  the  President  of  the  Branch) 
to  nominate  suitable  persons  to  fill  the  vacancies  as  they  occur  by  rotation  —  and  if, 
after  inquiry  from  other  independent  sources,  we  see  no  reason  to  distrust  their 
judgment,  we  generally  lean  to  their  nomination.    This  is  the  safest  general  prac- 
tice, because  if  we  at  a  distance  place  in  the  Direction  gentlemen  without  knowing 
their  precise  pecuniary  situation,  we  may  introduce  individuals  who  have  already 
borrowed  too  much,  who  wish  to  borrow  too  much,  or  who  have  needy  friends  whose 
claims  they  may  urge  successfully  while  sitting  at  the  Board,  when  they  might 
otherwise  be  resisted."— Biddle  to  John  McLean,  Jan.  11, 1829,  B.  P. 


388  THE  SECOND  BANK  OP  THE  UNITED  STATES 

peculation.1  His  successor  was  inefficient,  and  granted 
unjustifiable  loans  which  resulted  in  a  loss  of  $112,000. 2  At 
Hartford,  in  1826,  the  branch  management,  by  neglecting 
judicious  advice  from  the  president  of  the  bank,  incurred  a 
loss  sufficient  to  sweep  away  all  the  profits  for  the  first  six 
months  of  that  year.3  In  1827  the  cashier  at  Pittsburg 
flatly  disobeyed  orders,  not  only  by  neglecting  to  carry  out 
his  instructions  from  Philadelphia,  but  by  concealing  from 
the  branch  directors  the  instructions  themselves,  and  by 
failing  to  notify  the  central  board  of  his  delinquency  until 
months  afterward.4  In  1834  the  branch  at  Louisville 
refused  to  obey  the  orders  for  reduction.5  In  1832  the 
board  at  Lexington,  in  spite  of  strict  instructions  to  refuse 
all  discounts,  loaned  $5,000  "to  secure  the  Hon.  Henry 
Clay "  and  the  university  at  that  place,  though  the  derelic- 
tion was  immediately  reported  by  the  cashier.3  An  investi- 
gation of  the  Portland  office  in  the  same  year  revealed  a 
surprising  state  of  affairs  at  that  branch.  As  early  as  1829 
the  president  there  was  reported  as  in  control  of  the  office 
and  as  having  jeopardized  its  discounts,  while  two  directors 
appointed  on  his  recommendation  had  failed.7  He  was 

1 "  After  the  'death  of  Mr.  Cutts,  President  of  the  Office  at  Portsmouth,  Mr. 
James  Shapley  "  was  elected  and  the  delinquency  at  once  discovered. 

A  clerk  na,med  Parker  in  1822  "  forwarded  to  the  Board  here,  charges  against 
Mr.  Cutts,  accusing  him  of  applying  to  his  own  use,  the  monies  held  by  him  as  Loan 
Officer ;  but  these  charges  were  deemed  malicious  or  frivolous,  and  disregarded." 

"  Mr.  Cutts  had  chosen  the  directors  of  the  branch,  for  the  most  part  [i.  e.,  they 
were  chosen  on  his  recommendation]  who  have  never  been  much  known." — Biddle 
to  James  Lloyd,  Boston,  Oct.  4,  1824,  P.  L.  B.,  Vol.  I,  p.  174;  see  also  Biddle  to 
Ingham,  July  18, 1829,  H.  R.  460,  22d  Cong.,  1st  Sess.,  p.  442. 

2  Ibid.         3  Biddle  to  President  Parsons,  June  17, 1826,  P.  L.  B.,  Vol.  II,  pp.  169. 170. 

*  Cashier  Corey,  of  Pittsburg,  to  Cashier  Mcllvaine,  Jan.  15,  1827,  in  respect  to 
a  resolution  of  Sept.  26, 1826,  B.  P.;  Mcllvaine  to  Biddle,  Jan.  21, 1827,  ibid. 

5  "  The  determination  of  the  directors  of  the  Branch  Bank  of  this  city  to  dis- 
obey the  recent  order  of  the  parent  bank,  has  been  very  generally  approved,  even 
the  friends  of  the  bank  approve  it,  because  they  can  perceive  no  necessity  for  a 
measure  so  harsh  and  oppressive." — Louisville  Public  Advertiser,  C.  D.,  Vol.  X, 
Part  III,  p.  3157. 

6  J.  Towler  to  Biddle,  private,  Aug.  21, 1832,  B.  P. 

1  Biddle  to  Cowperthwaite,  March  13, 1829,  P.  L.  B.,  Vol.  Ill,  pp.  23-5. 


THE  BRANCHES  AND  THEIR  ADMINISTRATION  389 

"utterly  unfit  for  his  place;  ....  ignorant,  inefficient, 
coarse  in  manners,  and  in  all  respects  an  incumbrance  to  the 

office The  board,  called  at  11  o'clock,  seldom  met 

till  one  —  and  then  seldom  or  never  organized  —  official 
letters,  when  received,  rarely  communicated,  or  perhaps 
thrown  carelessly  on  the  table,  to  be  read  by  such  as  chose  to 
read  them  —  no  minutes  kept  —  and  official  papers  the  most 
important  irregularly  scattered  —  some  in  the  office  and  some 
at  his  private  dwelling."1 

This  case  shows  neglect  in  the  officials  at  headquarters, 
since  Biddle  was  informed  of  the  president's  incapacity 
three  years  before  the  investigation  took  place.  The  other 
cases,  however,  might  have  been  amenable  to  no  oversight. 
The  essential  difficulty  lay  in  the  characters  of  the  branch 
directorates  and  the  branch  officers,  who  were  not  expert 
bankers.  Usually,  too,  the  central  board  took  immediate 
cognizance  of  complaints.  Thus  when  charges  were  made 
against  the  cashier  at  Washington  in  1824,  the  Phila- 
delphia board  at  once  suspended  him,  and  a  thorough  inves- 
tigation was  made  both  by  the  Washington  directors  and  by 
those  at  Philadelphia.2  The  president  of  this  office,  who 
had  been  forced  upon  the  bank  by  the  branch  directors, 
was  also  removed  in  1827  for  inefficiency  and  failure  to 
give  proper  attention  to  the  affairs  of  the  office.3  Further 
complaints  about  the  cashier,  however,  were  not  noticed.* 
Charges  made  in  respect  to  the  Norfolk  office  were  taken  up 

1  Cadwalader  to  Biddle,  Philadelphia,  May  24,  1832,  B.  P.,  quoting  Cowper- 
thwaite's  report  on  the  office. 

2  SMITH'S  Defense,  pp.  23,  24,  Appendix  VII,  and  pp.  29,  30.    The  Washington 
board  cleared  Smith  by  a  vote  of  5  to  1,  the  Philadelphia  board  unanimously. 

3  Biddle  to  President  Thomas  Swann,  of  Washington,  Dec.  10, 1827,  P.  L.  B.,  Vol. 
II,  p.  322. 

<  Edward  Jones,  writing  to  Biddle  from  Washington,  Oct.  31,  1827,  declines  to  sit 
on  board  longer  because  it  is  too  subservient  to  the  cashier.  The  cashier  has  shielded 
culprits  who  have  been  committing  robbery  on  the  bank  for  three  years  past ;  to  the 
cashier's  "  unpardonable  negligence  the  robbery  is  chiefly  to  be  attributed." 

Jones  also  complained  June  21, 1826,  of  business  done.  The  branch  would  lose 
$500,000  now  under  protest.—  B.  P. 


390  THE  SECOND  BANK  OP  THE  UNITED  STATES 

as  soon  as  made  and  thoroughly  investigated  by  the  central 
board.1 

Much  more  serious  than  these  minor  acts  of  disobedience, 
inefficiency,  and  dishonesty  was  the  failure  to  control  the 
western  and  southern  offices  after  the  introduction  of 
Biddle's  plan  of  exchange  operations  to  support  the  circula- 
tion of  branch  notes.  As  the  dealings  in  exchange  were 
almost  wholly  in  the  hands  of  the  branch  executives,  the 
opportunities  for  evading  the  strict  regulations  of  the  bank 
were  much  increased  under  these  new  circumstances,  and  it 
was  inevitable  that  with  directorates  composed  of  men  igno- 
rant of  sound  banking  these  opportunities  would  not  be  neg- 
lected. Furthermore,  the  enormous  expansion  of  the  bank's 
business  after  1829  made  proportionally  difficult  the  task  of 
investigation,  supervision,  and  control,  while  the  distance  of 
the  branches  from  the  central  offices,  added  to  the  wretched 
means  of  communication,  infinitely  aggravated  the  difficulty. 
Finally,  as  these  considerations  pressed,  the  distant  offices  were 
occasionally  permitted  to  suspend  the  rules  which  had  gov- 
erned their  operations  in  the  past,2  and  thus  a  further  opportu- 
nity was  afforded  for  the  transaction  of  reprehensible  business. 

The  history  of  the  bank  in  its  later  years  proves  con- 
clusively that  the  branches  south  and  west  loaned  large  sums 
on  accommodation  paper,  and  frequently  renewed  the  loans ; 
that  they  employed  much  too  large  a  proportion  of  the  bank's 

1  Biddle  to  H.  Binney,  Jan.  29, 1832,  P.  L.  B.,  Vol.  IV,  p.  137,  and  H.  R.  460,  22d 
Cong.,  1st  Sess.,  p.  547. 

2  "  The  12th  article  of  the  bye-laws  for  the  government  of  the  offices,  restricting 
their  discounts  to  notes  having  not  more  than  sixty  days  to  run,  was  passed  on  the  3d 
of  January,  1817,  ....  It  has  not  yet  been  formally  repealed;  but,  being  found  imprac- 
ticable, and  not  calculated  for  the  business  of  the  country,  or  the  convenience  of  the 
bank,  all  the  branches  I  believe,  without  exception,  have,  from  time  to  time,  been, 
by  special  resolutions  and  instructions,  exempted  from  its  operation.    It  is,  there- 
fore, in  fact  repealed,  though  not  in  form." 

Articles  4  and  6  for  exchange  operations  "  are  in  force,  except  so  far  as  they  may 
have  undergone  modifications,  by  instructions  to  particular  offices,  growing  out  of 
the  exchange  operations  adapted  to  their  respective  localities." — Biddle  to  .the  com- 
mittee of  1832,  H.  R.  460,  22d  Cong.,  1st  Sess.,  p.  542. 


THE  BRANCHES  AND  THEIR  ADMINISTRATION  391 

means,  and  could  not  be  controlled  when  attempts  were  made 
to  check  them. 

The  Cincinnati  office  furnishes  excellent  evidence  to  sub- 
stantiate these  assertions.  When  the  policy  of  expansion 
became  effective  in  1827,  permission  was  accorded  this  office 
to  grant  discounts  to  former  debtors  who  had  not  cleared 
themselves  with  the  bank.1  Early  in  1832  Biddle  was  notified 
that  some  of  the  old  debtors  were  exercising  an  undue  in- 
fluence over  the  officers,  securing  loans  to  which  they  were 
not  entitled,  and  speculating  in  the  bank's  real  estate.2  No 
notice,  apparently,  was  taken  of  these  warnings,3  but  later 
in  the  year  the  Cincinnati  counsel  of  the  bank  assured  Biddle 
that  too  many  large  loans  were  made,  that  the  directors  had 
decided  to  call  in  10  per  cent,  of  the  loans  every  ninety 
days,4  that  the  "crisis  is  full  of  difficulty,"  and  that  the 
branch  was  taking  mortgages  to  secure  doubtful  paper  on 
its  renewal.8  Evidently  constant  renewal  was  the  rule  at 
Cincinnati,  and  the  calling  in  of  10  per  cent,  every  ninety 
days  was  considered  a  drastic  measure. 

At  Nashville  similar  conditions  prevailed.  The  "  race- 
horse bills  "  invented  during  the  administration  of  William 
Jones  were  again  extensively  employed,  and  the  complaint 
of  the  president  of  the  branch  shows  that  the  cashier,  a  local 

1  Biddle  to  Cashier  Benson,  May  19, 1827,  P.  L.  B.,  Vol.  II,  pp.  263-5. 

2  "  The  best  of  my  information  and  judgement  is,  that  for  several  years  past,  an 
influence  has  gradually  gained  the  ascendency  in  the  Branch  composed  of  the  old 
managers  of  1817-1820,  and  that  Messrs.  Cope  and  Benson  have  with  great  ingenuity 
been  involved  in  their  toils.    That  the  Branch  has  been  managed  to  a  great  extent 
in  favor  of  other  interests,  than  those  of  the  community  at  large, —  or  the  Bank 
itself, —  that  for  some  months  past  almost  all  the  business  paper  has  been  rejected  — 
and  whatever  loans  have  been  made,  have  been  applied  in  relief  of  speculators  in 
property,  and  of  some  few  persons  whose  zeal  to  engross,  has  carried  them  beyond 
their  depth."— Henry  Avery  to  Biddle,  March  24,1832,  confidential,  B.  P.    Same  to 
same,  Feb.  1, 1832,  confidential,  ibid. 

3  Same  to  same,  May  5, 1832,  ibid. 

*  Bellamy  Storer  to  Biddle,  Cincinnati,  May  22, 1832,  ibid. 

^  "  In  all  cases  where  the  debt  is  the  least  doubtful,  I  recommend,  as  their  legal 
adviser,  that  we  ask  a  mortgage,  on  condition  of  renewing  the  paper.  This  request 
is  always  granted,  and  by  this  means  I  have  saved  thousands  to  the  institution." — 
Same  to  same,  Dec.  7, 1832,  ibid. 


392  THE  SECOND  BANK  OP  THE  UNITED  STATES 

appointee,  and  probably  the  only  cashier  of  that  character  in 
the  bank's  western  offices,  had  secured  control  and  man- 
aged matters  to  suit  himself.  The  aggrieved  president 
wrote  to  Biddle: 

I  have  often  hinted  to  you,  in  my  former  letters  that  Our 
Cashier — Was  entirely  too  fond  of  Bills  of  exchange — and  often  on 
the  refusal  of  bills  by,  me  that  he  wished  to  take;  I  have  gotten  the 
ill-will  of  my  neighbors,  as  he  never  of  late  years  was  known  to 
refuse  a  bill — of  exchange  let  it  be  as  it  would —  ....  This  season 
he  does  Vote  against  some  —  but  not  with  his  Consent  it  would 
ease  me  of  a  good  deal  of  responsibility  if  you  would  drop  a  hint  to 
him  on  this  subject  ....  he  is — one  of  the  Best  officers  belong- 
ing to  the  Establishment — but  he  would  run  too  great  risques  to 
make  Money — please  keep  this  to  yourself. l 

Here  is  revealed  the  essential  defect  of  western  manage- 
ment: an  ignorant  cashier2  bent  on  making  money  at  all 
odds,  and  willing  to  take  any  kind  of  paper,  and  a  president 
who  does  not  wish  the  "  ill-will  of  his  neighbors."  Instruc- 
tions were  given  to  stop  the  bill  business,  only  to  elicit  the 
response  that  such  action  was  impossible.  The  cashier  at 
Nashville  was  the  one  instance  of  the  appointment  of  a  cashier 
from  the  vicinage  of  an  office  after  the  beginning  of  Biddle's 
administration.  The  appointment  had  been  made,  Biddle 
said,  largely  on  the  recommendation  of  the  officer  by  Andrew 
Jackson  in  1818.  It  was  the  irony  of  fate  that  precisely  there 

1  J.  Nichol  to  Biddle,  Nashville,  Nov.  22, 1832,  B.  P. 

2  The  following  extract  from  one  of  Sommerville's  letters  will  indicate  his  quali- 
fications :  "  The  course  pursued  by  the  board,  in  its  general  diffusion  of  discounts, 
has  always  commanded  my  approbation,  as  thereby  it  extends  its  immense  benefits 
to  the  doors  of  every  section  of  the  country,  and  thus  affording  the  strongest  practi- 
cal proofs  of  the  incalculable  importance  of  the  operations  of  the  Bank  of  the  United 
States  through  its  unrivalled  machinery  in  the  improvement  of  the  wealth,  happi- 
ness, and  general  welfare  of  the  country,  in  every  particular ;  passing  through  every 
grade  of  society,  from  the  wealthiest,  in  regular  gradation,  to  the  poorest  man  in 
the  country ;  and  in  this  none  are  so  much  or  more  benefitted  than  the  poorest  and 
middling  classes  of  our  country,  and,  above  all,  the  agriculturists  of  every  rank  and 
denomination ;  combining,  at  the  same  time,  with  such  important  results,  that  of 
the  greater  security  for  the  debts  of  the  institution  in  the  way  before  described ;  and 
I  feel  fully  persuaded  that,  if  the  parent  board  had  set  here,  they  would,  under  all 
circumstances,  have  operated  precisely  in  the  same  way  that  the  board  has." — Nov. 
26, 1832,  H.  B.  121,  22d  Cong.,  2d  Sess.,  p.  158. 


THE  BRANCHES  AND  THEIR  ADMINISTRATION  393 

the  most  reckless  and  reprehensible  banking  should  have 
been  done. 

Cashier  Jaudon  of  the  New  Orleans  office,  an  intimate 
friend  of  the  bank's  president,  an  old  and  trusted  employee 
of  the  central  office,  later  to  be  its  cashier,  appears  to  have 
been  responsible  for  much  of  the  unsafe  bill  business  in  the 
West.  In  April,  1832,  Biddle  wrote  him  saying  that  he  had 
"  rarely  been  so  much  surprized  and  startled "  as  by  the 
appearance  of  the  accounts  of  the  New  Orleans  extension  in 
inland  bills  of  exchange,  and  instructed  him  to  give  up  the 
purchase  of  widely  scattered  bills  and  direct  his  attention  to 
foreign  exchange.1  In  answer  Jaudon  returned  a  long  defense, 
declaring  that  the  office  could  liquidate  bills  of  exchange  drawn 
upon  it  by  the  western  branches  only  by  drawing  more  bills 
upon  them;  in  other  words,  by  creating  "race-horse  bills." 
Protests  from  the  bank  did  not  cease,  Cashier  Mcllvaine 
writing  Biddle  that  a  large  part  of  the  exchange  purchases 
made  at  New  Orleans  "  must  come  up  by  the  roots." 2  But 
they  were  so  deeply  planted  that  getting  them  up  was  not  an 
easy  matter.  It  is  significant,  in  regard  to  the  business  done 
later  by  the  bank,  that  Jaudon  became  cashier  at  Philadel- 
phia in  July,  1832. 

Other  offices  showed  equal  inability  to  answer  the 
demands  of  the  bank.  In  1834  Charleston  could  not  dimin- 

i  "  I  have  rarely  been  so  much  surprized  and  startled  as  at  the  appearance  of 
your  two  last  weekly  statements  representing  such  an  extension  of  discounts  of 
domestic  bills  widely  scattered  and  of  circulation  which  in  the  present  state  of  the 
country  presses  upon  us  immediately.  My  surprize  has  been  increased  by  the  cir- 
cumstance that  you  seemed  in  your  correspondence  with  Mr.  Mcllvaine  to  have 
understood  completely,  as  you  always  do,  our  whole  plan  of  operations,  and  were 
preparing  to  act  in  concert  with  us,  but  these  increases  of  every  branch  of  your  busi- 
ness are  entirely  at  variance  with  that  plan."  Instructs  him  to  reduce  at  once,  to 
give  up  scattered  domestic  exchange,  and  to  buy  foreign  exchange. — Biddle  to 
Jaudon,  April  20, 1832,  P.  L.  B.,  Vol.  IV,  p.  256. 

2 "The  aggregate  loans  [of  the  New  Orleans  office]  appears  almost  exactly  at 
the  same  point  at  which  they  stood  on  the  30th  day  of  April,  but  more  than  two-thirds 
of  the  domestic  bills  purchased  are  at  60  days  upon  the  Northern  Cities— and  a  large 
portion  of  them  must  '  come  up  by  the  roots.'  " — To  Biddle  at  Washington,  June  1, 
1832,  B.P. 


394  THE  SECOND  BANK  OP  THE  UNITED  STATES 

ish  its  accommodations,1  while  the  Louisville  office  made 
a  return  showing  that  it  had  on  hand  a  large  amount 
of  what  was  called  "stationary  debts,"  only  $648,000  out 
of  a  total  of  $2,348,000  being  payable  at  maturity.2  The 
correspondence  of  other  western  offices  reveals  the  same 
conditions. 

In  the  East  the  bank  was  also  lax  in  the  assertion  of  its 
authority.  At  the  New  York  office  in  1828  Robert  Lenox 
complained  that  too  much  money  was  loaned;3  in  1832  he 
asserted  that,  in  spite  of  instructions  to  contract,  the  board 
expanded  its  discounts,  and  in  addition  made  loans  to  itself 
and  to  brokers.*  In  1834  he  declared  that  the  cashier  would 
not  do  his  duty ;  that  discounts  were  made  after  the  board 
separated;  that  loans  were  charged  to  the  account  of  bills 
receivable;  that  overdrafts  were  permitted;  that  the  com- 
mittee on  domestic  exchange  was  an  evil;  that  its  members 
made  loans  to  themselves;  and  that  the  president  and  his 
family  had  large  sums  from  the  bank,  half  of  it  being 
charged  to  bills  receivable.5  In  1828  the  Portsmouth  branch 
proved  that  it  had  been  badly  managed  by  suffering  $148,000 
out  of  $460,000  of  notes  discounted  to  go  to  protest.  Out 
of  this  sum  $112,000  was  likely  to  be  lost.6  Renewals  were 

1 8.  D.  17,  23d  Cong.,  2d  Sess.,  p.  78.  2  ibid.,  p.  110. 

3  Lenox  to  Biddle,  March  5, 1828,  B.  P.  *  Same  to  same,  Feb.  29, 1832,  ibid. 

5  The  cashier  is  going  to  be  in  Philadelphia,  and  Biddle  must  "  convince  the 
cashier  that  he  is  bound  to  do  his  duty.  It  will  occupy  more  of  your  time  than  I 
chose  to  claim ;  to  state  all  that  requires  amendment.  Suffice  for  the  moment  that 
discounts  should  not  be  made  after  the  board  seperate.  None  should  be  made  and 
charged  to  '  Bills  receivable ' —  People  should  not  be  allowed  to  overdraw  their 
account  by  lodging  a  note  under  the  promise  if  not  discounted  —  they  will  make 
good  the  overdrawing — It  need  not  be  stated  what  the  result  is  —  In  short  it  is  no 
more  like  the  Bank  it  was  and  what  it  is  now  intended  to  be,  than  any  other 
extremes." 

He  and  Mr.  Eathbone  "remind  the  board  that  they  are  acting  contrary  to 
orders,  but  they  care  for  none  of  these  things."  Some  directors  help  themselves. 
"Our  Committee  on  Domestic  Exchange  is  a  great  Evil  —  much  is  done  that  was 
never  intended,  and  in  fact  it  is  a  species  of  Executive  Patronage  very  much 
abused,  and  seldom  a  day  when  I  do  not  point  out  the  instances." — B.  Lenox  to 
Biddle,  Feb.  15, 1834,  ibid. 

«  Biddle  to  Ingham,  July  18, 1829.— H.  R.  460,  22d  Cong.,  1st  Sess.,  p.  442. 


THE  BRANCHES  AND  THEIR  ADMINISTRATION  395 

common  here,  the  rule  being  the  collection  of  10  per  cent, 
every  one  hundred  and  twenty  days.1 

The  real  peril,  however,  was  with  the  western  branches, 
and  arose  from  the  opportunities  granted  them  in  dealings 
in  inland  exchange,  as  Biddle  tacitly  admitted  in  1834, 
when  he  gave  utterance  to  his  dread  of  renewing  the  bill 
business  of  the  West.2  He  knew  well  that  bills  were  con- 
stantly renewed,  and  that  too  many  were  bought.  The 
directors,  however,  denied  all  knowledge  of  such  operations, 
and  were  certain  that  the  paper  discounted  was  sound.3 
Such  ignorance  was  so  far  from  being  an  excuse  that  it  con- 
demned them  as  inefficient  and  negligent  agents  of  an 
honorable  trust.  Even  the  executive  officers  do  not  seem  to 
have  been  thoroughly  informed  until  1832.*  In  October, 
1833,  Jaudon's  letters  to  the  cashier  at  New  York  prove 
that  he  did  not  even  understand  the  custom  of  that  office  in 
respect  to  the  receiving  of  branch  notes.5 

On  the  whole,  however,  loose  methods,  wilful  disobedi- 
ence, dishonesty,  and  reprehensible  transactions  were  by  no 
means  so  common  even  in  the  later  years  of  Biddle' s 
administration  as  they  had  been  in  the  early  years  of  the 
bank.  The  capital  was  kept  localized,  though  too  much  of  it 
was  employed  in  the  West  and  Southwest,6  and  though  the 
business  led  to  losses,  they  were  not  excessive.  The  total  losses 

1  Extra  Globe,  Vol.  I,  p.  256. 

2  "  Unfortunately  these  bills  are  mainly  in  the  crop  exchange  of  the  western 
cities,  and  I  feel  a  little  afraid  of  reviving  them."— Biddle  to  Jaudon,  Newport,  July 
16, 1834,  ibid. 

3J7.  R.  121,  22d  Cong.,  2d  Sess.,  pp.  58,  77,  89. 

*"  I  should  be  glad  to  receive  from  you  an  explanation  of  the  business  upon 
which  bills  drawn  upon  St.  Louis,  Natchez,  Nashville,  Lexington,  Cincinnati,  Pitts- 
burgh, and  Wheeling  are  founded,  and  how  far  the  purchase  of  such  bills  could  be 
restricted  without  producing  injurious  consequences." — Jaudon  to  the  cashier  at 
Pittsburg,  Nov.  10, 1832,  ibid.,  p.  143. 

5  Jaudon  to  cashier  at  New  York,  Oct.  5, 1833,  S.  D.  17,  23d  Cong.,  2d  Sess.,  pp. 
122, 123. 

6  New  England     -       -       -    $2,900,000       South $2,500,000 

Middle  states        -       -         21,650,000       West  and  Southwest  -         5,950,000 

The  capital  at  Philadelphia  ($16,450,000)  must  have  been  largely  nominal. 


396  THE  SECOND  BANK  OP  THE  UNITED  STATES 

before  August,  1822,  were  $3,005,000,  while  in  1836  they  were 
$4,600,000,  so  that  not  more  than  one-third  of  the  whole 
had  been  lost  in  Biddle's  presidency,  which  covered  two- 
thirds  of  the  term  of  the  bank's  existence.  In  the  long  run 
the  losses  were  beyond  the  figures  given,  because  part  of 
the  suspended  debt  was  never  paid.  The  calculation  in 
1836  was  that  this  would  furnish  an  additional  loss  of 
$1,389,000,  but  the  greater  part  of  this  would  also  be  due 
to  the  operations  of  the  first  few  years.  That  the  so-called 
"  active  debt" — the  discounts  on  personal  security — was  good, 
is  proved  by  the  fact  that  the  bank  sold  the  "active  debt" 
of  eighteen  branches  at  par  for  $15,716,726.'  Of  this  sum 
$8,990,000  were  paid  for  the  "  active  debt "  of  seven  out  of 
eight  western  and  southwestern  offices,  while  for  that  at  the 
Charleston  office  $2,073,745  were  paid.3  These  figures  do  not 
indicate  anything  resembling  insolvency,  or  even  unusual 
losses  on  the  investments.3 

1  Ex.  Doc.  118,  24th  Cong.,  2d  Sess.,  p.  109. 

2  Ibid.    Henry  Carey  calculated  that  from  1820  to  1836,  inclusive,  the  loss  on  the 
•whole  capital  loaned  on  personal  security  was  not  over  one-fifth  of  1  per  cent,  per 
annum.— Credit  System  in  the  United  States,  etc.,  p.  29.    The  considerable  losses  took 
place  in  the  South  and  West. 

BUSINESS  LOSSES  1822-36  (round  numbers) 

Norfolk $  38,000       New  Orleans       ...    $  12,000 

Fayetteville     -       -       -  91,000       Nashville         -       -       -  2,000 

Charleston   ....      105,000       Lexington    ....      257,000 
Savannah         -       -       -  81,000 

For  statistics  see  H.  R.  460,  22d  Cong.,  1st  Sess.,  p.  244,  and  Ex.  Doc.  118,  24th 
Cong.,  2d  Sess.,  pp.  58,  59. 

Between  March,  1836,  when  this  statement  was  made,  and  July  of  the  same  year, 
at  one  office,  probably  Natchez,  $405,280  of  the  active  debt  went  to  protest,  or  10  per 
cent,  of  the  whole  debt. — Ibid.,  p.  43.  A  considerable  part  of  this  would  be  lost. 
The  same  state  of  affairs  must  have  existed  at  some  of  the  other  offices.  The  same 
conclusion  holds  as  to  the  suspended  debt.  That  of  the  office  at  Cincinnati  netted 
a  loss  of  $140,846  (ibid.,  p.  58) ;  at  Pittsburg  of  $38,050.— Ibid.,  p.  59. 

3  Moreover,  all  losses  were  amply  covered  by  a  contingent  fund  which  had  been 
established  by  President  Cheves.     Biddle's  administration   increased   this  fund 
enormously,  so  that  in  1836  it  amounted,  to  $5,943,000,  more  than  sufficient  to  cover 
losses  charged  to  all  the  heads  under  which  losses  might  come  on  the  books  of  the 
bank.    Besides  this  there  was  a  fund  of  surplus  profits  of  over  $3,700,000.— Ibid., 
p.  83.    There  was  also  a  similar  fund  of  $1,104,223,  to  cover  losses  on  banking  houses. 
— Ibid.    This  would,  of  course,  more  than  cover  any  such  losses.    The  fund  was,  in- 
deed, a  part  of  the  surplus  which  was  put  under  this  head  in  1831,  with  the  purpose 


THE  BRANCHES  AND  THEIR  ADMINISTRATION  397 

Nevertheless  it  would  be  a  mistake  to  argue  that  because 
the  loans  were  actually  safe,  therefore  they  were  made  in  ac- 
cordance with  the  principles  of  sound  and  conservative  bank- 
ing. This  is  not  true,  and  if  the  bank  had  been  forced  to 
pass  through  a  commercial  crisis,  such  as  that  of  1819  or 
that  of  1837,  no  one  conversant  with  its  situation  can  doubt 
that  the  losses  would  have  been  well-nigh  ruinous. 

The  office  at  New  Orleans  was  the  most  important,  be- 
cause that  city  was  the  emporium  for  all  the  trade  of  the 
West  and  Southwest.  Vast  accumulations  of  funds  from 
other  branches  and  from  the  state  banks  inevitably  took 
place  there,  as  the  result  of  shipments  of  produce  from 
western  Pennsylvania,  Ohio,  Missouri,  Kentucky,  Tennessee, 
and  Mississippi.1  New  Orleans  was  consequently  the  center 
of  exchange  dealings  for  the  entire  western  and  southwestern 
country,  while  its  loans  on  personal  security  were  always 
extensive.  As  it  was  the  most  distant  office,  it  was  almost 
independent  of  control,  and  unusual  care  was  employed  in 
selecting  its  officers  and  its  board.2  Next  in  importance 
stood  New  York.  Both  of  these  offices  at  times  transacted 
a  larger  business  than  that  of  the  bank  at  Philadelphia,  and 
from  the  beginning  of  1831  to  the  end  of  1834  this  was  the 
rule  at  New  Orleans.3  The  third  branch  in  importance  was 

of  concealing  the  size  of  the  surplus  from  Congress.  "  I  shall  propose  this  because 
I  do  not  wish  to  increase  the  surplus  fund  of  $1,750,000  —  nor  the  contingent  fund  of 
$2,100,000,  which  if  too  ostensible  might  increase  the  cupidity  of  those  with  whom 
we  may  hereafter  have  to  deal." — Biddle  to  Cadwalader,  Dec.  30, 1831,  B.  P. 

1  The  profits  were  commensurate,  being  in  1829  34V£  per  cent,  on  the  capital  em- 
ployed.—Biddle  to  C.  J.  Ingersoll,  March  30, 1830,  P.  L.  B.,  Vol.  Ill,  pp.  209,  210. 

2  "We  regard  the  office  at  New  Orleans  from  its  distance  from  the  parent  Bank, 
from  its  intrinsic  importance,  and  from  its  being  the  key  of  the  Western  offices,  as 
the  first  on  the  whole  establishment,  decidedly  superior  to  any  other  office,  and  de- 
manding indeed  for  the  Cashier  the  qualities  of  perfect  confidence  in  his  fidelity 
even  in  a  higher  degree  than  would  be  required  in  any  situation  in  the  Bank." — 
Biddle  to  R.  Gilmor,  of  Baltimore,  Jan.  4, 1826,  ibid.,  Vol.  II,  p.  90. 

3  TOTALS  —  DISCOUNTS  AND  EXCHANGE 

1827  Jan.  30  July  30  1831  Jan.  30  July  30 

Philadelphia  -  -  $3,517,000  $3,568,000  Philadelphia  -  -  $5,678,000  $8,789,000 
New  York  -  -  3,432,000  4,367,000  New  York  -  -  3,273,000  4,370,000 
New  Orleans  -  -  2,822,000  3,011,000  New  Orleans  -  -  7,500,000  10,282,000 


398  THE  SECOND  BANK  OP  THE  UNITED  STATES 

that  at  Charleston,  which  was  the  center  of  exchange  opera- 
tions for  the  South,  though  in  the  later  years  the  offices  at 
Nashville  and  Louisville  sometimes  carried  on  more  ex- 
tended operations  than  did  that  at  Charleston.  The  centers 
of  the  bank's  operations  would,  therefore,  be:  Philadelphia 
and  New  York  for  the  East,  Charleston  for  the  South,  New 
Orleans  for  the  Southwest,  and  Nashville  and  Louisville  for 
the  West. 

In  all  twenty-six  branches  were  established,  though  not 
more  than  twenty-five  existed  at  any  one  time.  The  first 
eighteen  were  located  in  the  first  year  of  the  bank's  exist- 
ence, the  other  eight  under  President  Biddle.  The  Cincin- 
nati branch  was  discontinued  in  1820  and  re-established  in 
1825,1  the  Chillicothe  branch  being  discontinued  in  the  latter 
year;  while  the  Middletown  office  in  Connecticut  was  trans- 
ferred to  Hartford  in  the  same  state  in  1824. 2  Benton  and 
others  boldly  asserted  that  the  Biddle  administration  se- 
tected  the  locations  of  the  new  offices  from  political  considera- 
tions, but  there  is  not  a  grain  of  evidence  to  support  these 
charges.  Had  such  motives  swayed  the  directors,  they  would 
certainly  have  established  many  more  offices,  for  they  had 
most  tempting  inducements  in  the  applications  made  by  the 
secretary  of  the  treasury,  the  governors  of  territories,  state 


1828 

Jan.  30 

July  30 

1832 

Jan.  30 

July  30 

Philadelphia 

$4,560,000 

$4,396,000 

Philadelphia 

$10,878,000 

$7,963,000 

New  York         -       - 

5,142,000 

4,535,000 

New  York 

-     6,065,000 

5,597,000 

New  Orleans 

2,935,000 

4,071,000 

New  Orleans 

8,811,000 

12,911,000 

1829 

1833 

Philadelphia  - 

4,446,000 

4,234,000 

Philadelphia  - 

-     7,200,000 

7,903,000 

New  York     -       - 

4,196,000 

4,521,000 

New  York     - 

5,710,000 

5,857,000 

New  Orleans    - 

3,864,000 

6,299,000 

New  Orleans    - 

-     7,599,000 

10,020,000 

1830 

1834 

Philadelphia 

4,670,000 

3,942,000 

Philadelphia 

7,586,000 

7,090,000 

New  York 

4,092,877 

3,877,000 

New  York 

•      6,348,000 

5,857,000 

New  Orleans 

5,718,000 

8,754,000 

New  Orleans 

7,866,000 

5,723,000 

Compiled  from  the  monthly  reports  of  the  bank. 

1  NILES,  Vol.  XXVIII,  p.  176. 

2  On  the  ground  that  more  business  was  to  be  secured  at  Hartford. —  Biddle  to 
Enoch  Parsons,  April  7, 1824,  P.  L.  B.,  Vol.  I,  pp.  143, 144. 


THE  BRANCHES  AND  THEIB  ADMINISTRATION  399 

legislatures,  statesmen,  congressmen,  politicians,  state  offi- 
cials, and  prominent  business  men.  One  may  say  without 
hesitation  that  if  political  motives  had  controlled,  the  bank 
would  have  established  an  office  at  Albany  in  response  to 
the  petition  of  Martin  Van  Buren  and  the  members  of  the 
Albany  regency  in  1826,1  for  certainly  the  establishment  at 
that  place,  and  under  such  circumstances,  would  have  saved 
the  bank  from  bitter  attacks.  In  all  sixty-three  applica- 
tions for  new  branches  were  refused.2 

The  selection  of  the  offices  was  in  fact  made  with  the  pur- 
pose of  combining  business  interests  and  the  interests  of  the 
government.  Of  offices  located  rather  for  government  than 
business  purposes  three  may  be  designated,3  while  of  those 
more  directly  beneficial  to  the  bank  than  to  the  government 
there  were  not  more  than  six.*  Twelve  out  of  the  total  of 
twenty-six  offices  were  established  virtually  on  the  seaboard, 
beginning  at  Portland,  Me.,  and  running  to  New  Orleans.5 
In  addition  five  offices  were  located  so  as  to  be  easily  acces- 
sible to  the  coast;6  one  was  placed  on  Lake  Erie;7  one  on 
the  Erie  Canal  ;8  one  on  Lake  Champlain  ;9  one  at  the  source 
of  the  Ohio;10  two  on  the  Ohio;11  three  on  the  Mississippi;12 
and  two  on  tributaries  of  the  Ohio.13  Roughly  speaking, 
the  offices  may  be  divided  into  nineteen  connected  with  the 
Atlantic  seaboard  and  seven  on  the  Mississippi  and  its  tribu- 
taries, with  New  Orleans  as  connecting  link  between  the  two 
systems. 

i  S.  D.  17,  23d  Cong.,  2d  Sess.,  pp.  251-3. 

2/6id.  3  Portland,  Me.,  Norfolk,  Va.,  and  St.  Louis. 

*  Buffalo,  Utica,  Burlington,  Lexington,  Natchez,  Cincinnati. 

5  Portland,  Me.,  Portsmouth,  N.  H.,  Boston,    Providence,  New  York,  Phila- 
delphia, Baltimore,  Norfolk,  Charleston,  Savannah,  Mobile,  New  Orleans. 

6  Hartford,  Washington,  Richmond,  Fayetteville,  Natchez.  7  Buffalo. 

8  Utica.          9  Burlington,  Vt.          lOPittsburg.          "  Cincinnati  and  Louisville. 
!2  St.  Louis,  Natchez,  and  New  Orleans.    The  last  is  counted  also  among  the  sea- 
board cities. 

13  Nashville  and  Lexington. 


400  THE  SECOND  BANK  OP  THE  UNITED  STATES 

In  addition  to  the  regular  offices,  there  were  several 
agencies  of  various  kinds.  Two  were  located  at  Chillicothe 
and  Cincinnati,  whose  whole  business  was  to  secure  the 
debts  incurred  during  the  early  years  of  the  bank  and  super- 
intend sales  of  real  estate.  Agents  appointed  by  the  central 
board  managed  these  agencies,  and  Biddle  directed  much 
time  and  attention  to  them,  evolving  a  plan  of  operations  for 
the  liquidation  of  the  debts.  In  1823  the  suspended  debt 
at  Cincinnati  was  $2,528,350.  When  any  part  of  this  was 
secured  by  mortgage,  and  interest  was  regularly  paid,  the 
debtor  was  not  disturbed;  where  the  security  was  insuffi- 
cient, the  mortgage  was  foreclosed  and  the  property  sold, 
usually  to  be  purchased  by  the  bank,  which  then  improved 
it  in  whatever  way  possible.  The  final  operation  was  the  sale 
of  the  improved  property  in  small  parcels  at  a  profit.1  The 
branch  at  Cincinnati  was  re-established  as  an  aid  to  carrying 
out  this  policy.  As  a  result  of  efficient  management  of 
these  affairs,  the  sale  of  real  estate  in  the  West  in  the  end  not 
only  secured  returns  sufficient  to  cover  all  the  losses  of  the 
early  years,  but  yielded  an  excess.2 

The  agencies  at  Cincinnati  and  Chillicothe  were  closed  in 
1836.  Another  agency,  consisting  of  a  single  individual 
appointed  by  the  Savannah  board,  was  established  at  Macon, 
Ga.,  in  1830,  to  purchase  inland  bills  of  exchange.3  It  was 
closed  in  1834. 4 

The  particular  advantages  of  the  branch  system,  evident 
from  the  experience  of  the  Bank  of  the  United  States,  were 
briefly  as  follows:  The  funds  of  the  treasury  were  collected, 

1 "  I  determined  to  avert  such  a  tremendous  loss,  I  have  been  working  at  it  for 
nearly  eight  years,  and  I  have  now  the  great  satisfaction  of  thinking,  that  every 
dollar  of  it  will  probably  be  saved."— Biddle  to  S.  Smith,  Nov.  5, 1830,  P.  L.  B.,  VoL 
III,  pp.  385,  386.  For  plan  see  H.  R.  460,  22d  Cong.,  1st  Sess.,  p.  323. 

*Ez.  Doc.  118,  24th  Cong.,  2d  Sess.,  pp.  114, 115. 

3H.  R.  460,  22d  Cong.,  1st  Sess.,  pp.  480,  481. 

*  Biddle  to  John  Gumming,  June  19, 1834,  P.  L.  B.,  Vol.  V,  p.  237. 


THE  BRANCHES  AND  THEIR  ADMINISTRATION  401 

transferred,  and  disbursed  only  by  means  of  the  branches. 
In  the  dealings  in  exchange,  both  foreign  and  domestic,  the 
bank's  advantage  was  derived  altogether  from  its  system  of 
branches.  The  same  statement  holds  good  for  the  circula- 
tion of  the  bank.  Without  the  branches  it  would  have  been 
insignificant  in  quantity,  and  could  not  have  been  either 
general  or  uniform;  as  it  was,  the  system  furnished  the 
country  a  currency  better  and  cheaper  than  any  other  paper 
currency  which  had  yet  existed  in  the  United  States.  The 
branches  not  only  made  this  paper  more  convertible,  but 
more  elastic,  since  it  was  issued  in  response  to  business 
demands  in  the  various  localities,  and  withdrawn  as  the 
demands  died  away.  Another  consequence  of  the  possession 
of  branches  was  the  supplying  of  loans  at  a  cheaper  rate 
to  the  West  and  South  than  would  have  been  possible  with- 
out them.  A  further  result  of  this  ability  to  supply  cheap 
loans  was  an  otherwise  impossible  development  of  western 
and  southern  industries,  which  was  beneficial  to  those  sec- 
tions, whatever  its  effect  upon  the  bank  might  be.  Again,  the 
control  of  the  state-bank  issues  was  possible  only  through 
the  branches,  so  that  the  system  not  only  gave  the  people  a 
better  currency,  but  protected  them  from  the  ravages  of  a 
much  poorer  one.  It  may  be  added  that  the  branches  were 
sure  of  more  capable  management  than  merely  local  banks, 
since  they  received  the  attention  of  able  men  at  Philadel- 
phia as  well  as  that  of  the  local  directors;  that  the  branches 
facilitated  the  distribution  of  loanable  capital  owned  but  not 
employed  in  one  part  of  the  Union  and  needed  in  another; 
and  that  the  system  gave  to  the  managers  of  the  bank  much 
greater  opportunities  to  secure  valuable  information  about 
business  and  about  men  than  any  other  system  could  furnish. 
These  various  advantages,  it  is  safe  to  assert,  cannot  be  fur- 
nished by  any  bank  without  branches,  and  it  was  in  these 
that  the  Bank  of  the  United  States  exhibited  its  superiority 


402  THE  SECOND  BANK  OP  THE  UNITED  STATES 

over   any  other   banking   system    ever   established   in   the 
United  States. 

The  defects  of  the  system  were,  however,  great  and  per- 
ilous. In  the  last  analysis  all  resolved  themselves  into  a 
failure  to  exercise  an  adequate  control  over  the  offices.  To 
do  this  demanded  first-class  branch  officials,  complete  intel- 
ligence, eternal  watchfulness,  and  constant  checking  of  the 
operations  of  the  distant  branches.  The  conditions  rendered 
all  this  well-nigh  impossible.  The  denial  of  accommoda- 
tions at  the  branches  made  the  bank  unpopular,  and  conse- 
quently there  was  an  overwhelming  temptation  to  be  lenient 
in  the  management  of  them.  This  difficulty  was  involved 
with  a  second  —  the  nature  of  western  and  southern  business. 
Loans  in  a  new  country  are  almost  certain  to  be  made  on 
real-estate  security  and  at  long  dates.  This  is  not  good 
banking.  Yet  the  Bank  of  the  United  States  indulged  in  it, 
and  the  practice  of  renewing  even  long  loans,  and  finally  of 
making  such  loans  with  the  understanding  that  they  would 
be  renewed,  inevitably  grew  up.  Still  more  serious  was  the 
character  of  the  branch  officers  and  the  branch  directorates. 
On  the  whole  they  were  not  men  of  knowledge  and  experi- 
ence in  sound  banking.  The  president,  who  had  most  in- 
fluence in  determining  loans,  had  to  be  selected  from  these 
directors,  who  in  turn  must  be  taken  from  the  state  in  which 
the  branch  was  established — conditions  which  made  the  selec- 
tion of  competent  officials  at  times  impossible.  Moreover, 
these  men  had  to  deal  with  their  neighbors,  sometimes  their 
relatives,  and  in  the  handling  of  the  funds  of  distant  stock- 
holders were  more  inclined  to  care  for  their  friends  than  for 
the  bank.  Then,  too,  the  presidents  were  insufficiently  paid, 
and  first-class  talent  could  not  be  secured  for  meager  sala- 
ries. In  such  cases  it  was  almost  vain  to  attempt  the  check- 
ing of  the  boards,  and  it  was  not  until  the  cashiers  were 
carefully  selected  that  any  considerable  check  upon  local 


THE  BRANCHES  AND  THEIB  ADMINISTRATION  403 

banking  methods  and  reprehensible  loans  was  possible. 
Finally,  the  knowledge  necessary  and  the  investigations 
requisite  for  a  proper  control  of  the  offices  were  excessively 
difficult  to  secure  because  of  the  remoteness  of  the  offices 
from  the  mother  bank  and  the  lack  of  first-rate  means  of 
communication.  It  took  weeks  to  get  information  from 
New  Orleans  and  the  far  western  offices.  Yet  it  would  not 
do  to  attempt  complete  government  of  the  branches  from 
Philadelphia,  even  had  that  been  possible.  The  needs  of 
the  local  community  had  to  be  consulted,  and  only  men  of 
the  place  could  justly  measure  these. 

The  only  adequate  means  of  remedying  these  defects 
would  have  been  the  erection  of  a  board  at  Philadelphia 
entirely  separate  from  the  local  board,  whose  whole  time 
should  have  been  given  to  the  management  of  the  branches. 
Biddle  objected  to  the  suggestion  when  made,1  and  yet  adopted 
it  to  the  extent  of  having  assistant  cashiers  appointed  at  the 
parent  office  whose  business  was  solely  with  the  general 
affairs  of  the  bank.  Had  he  himself  been  relieved  of  the 
necessity  of  attending  to  local  business  at  Philadelphia,  the 
results  would  no  doubt  have  been  highly  beneficial.  Had 
the  central  board  been  confined  to  general  questions  of  man- 
agement and  supervision,  the  danger  of  managing  the  insti- 
tution from  the  point  of  view  of  local  Philadelphia  interests 
would  have  been  avoided,  and  the  opportunities  for  correct- 
ing bad  methods  and  prohibiting  unjustifiable  loans  would 
have  been  enormously  increased.  The  difficulties  of  com- 
munication would  have  been  solved  in  time  by  the  extension 
of  railroads  and  the  introduction  of  the  telegraph,  while  the 
lack  of  adequate  banking  knowledge  in  the  local  boards  would 
have  been  remedied  by  further  experience. 

i  The  suggestion  of  keeping  the  Philadelphia  business  separate,  with  a  separate 
cashier,  was  made  by  E.  J.  Dupont  to  Biddle,  Wilmington,  January  30, 1826,  li.  P. 


CHAPTER   XVII 

THE  ISSUES  OF  THE  BANK 

THE  charter  of  the  Bank  of  the  United  States  limited  the 
note  circulation  of  that  corporation  to  thirty-five  million 
dollars ;  *  stipulated  that  all  notes  should  be  paid  in  specie 
on  demand/  imposing  a  penalty  of  12  per  cent,  per  annum 
in  case  of  all  notes  not  so  paid;3  prohibited  the  issue  of 
notes  of  a  less  denomination  than  five  dollars ;  *  and  gave  the 
notes  a  partial  legal-tender  quality  by  making  them  receiv- 
able in  all  payments  to  the  United  States.6  These  provi- 
sions were  evidently  intended  to  render  difficult  a  suspension 
of  specie  payments  on  the  part  of  the  bank,  to  hinder  it 
from  making  excessive  issues,  to  restrict  the  circulation  of 
paper  for  small  sums,  and  to  establish  a  uniform  circulat- 
ing medium  for  the  use  of  the  government. 

Under  the  various  administrations  there  was  considerable 
difference  in  the  management  of  the  bank's  issues.  In  the 
presidency  of  William  Jones  the  use  of  the  notes  was  respon- 
sible for  many  of  the  embarrassments  experienced  during  that 
period.  The  corporation  had  inaugurated  at  the  beginning 
a  policy  of  expansion  which  was  secured  through  the  indis- 
criminate issue  and  indiscriminate  redemption  of  its  notes 
everywhere.  As  the  course  of  exchange  was  always  against 
the  West  and  frequently  against  the  South,  this  permitted 
the  western  and  southern  offices  to  issue  their  notes  without 
any  limitation  whatever.  The  consequence  was  that  the 
capital  of  the  bank  was  drawn  away  to  the  South  and  West. 
To  put  an  end  to  this  perilous  situation,  the  board  of  direc- 
tors in  August,  1818,  prohibited  the  offices  from  redeeming 

» Charter,  sec.  11,  Art.  8.    See  Appendix  I.  2  ibid.,  sec.  11,  Art.  12. 

» Ibid.,  sec.  17.  *  Ibid.,  sec.  11,  Art.  17.  6  ibid.,  sec.  14. 

404 


ISSUES  OF  THE  BANK  405 

notes  not  issued  by  the  particular  branch  to  which  they 
were  presented.  By  this  order  the  usefulness  and  currency 
of  the  bank's  issues  were  seriously  impaired.  Once  more 
there  was  no  common  medium  of  exchange,  and  thus  the 
first  attempt  to  give  the  country  a  better  currency  through 
the  agency  of  the  Bank  of  the  United  States  ended  io  failure. 

The  policy  of  refusing  to  receive  the  notes  except  where 
they  were  made  payable  was  supplemented  by  an  attempt  to 
restrict  the  issues,  and  these  fell  off  by  over  a  million  from 
April  to  July,  1818,  and  by  over  three  millions  up  to  Janu- 
ary, 1819.1  In  this  month  Jones  was  forced  to  retire,  and  in 
March  Langdon  Cheves  came  into  control. 

Cheves's  policy  led  to  a  continuation  of  the  contraction. 
It  is  true  that  the  five-dollar  notes  of  the  bank  were  once 
more  received  at  all  the  offices  at  par,2  but  the  western  offices 
were  not  permitted  to  issue  any  notes,3  and  the  circulation 
went  lower  and  lower.  In  April,  1819,  its  volume  was  less 
than  half  that  of  April,  1818,  and  by  December  of  1819  it 
was  only  a  little  over  one-third  that  of  April,  1818.  Indeed, 
during  Cheves's  entire  administration  the  issues  were  so 
carefully  restricted 4  that  it  was  hardly  possible  to  speak  of  a 
circulation  of  the  Bank  of  the  United  States  in  many  parts 
of  the  country,  notably  in  the  West.  In  so  far,  however,  as 
there  was  a  currency,  it  was  sound  and  fairly  uniform. 

In  January,  1823,  Cheves  retired  and  Nicholas  Biddle 
became  president  of  the  bank.  Biddle  was  particularly 
anxious  that  the  circulation  should  be  less  restricted,  espe- 
cially in  the  South  and  West,  where  the  advantages  of  a  uni- 
form circulating  medium  had  not  been  enjoyed  since  the 
restrictions  were  placed  upon  the  bank's  issues.  To  supply 

18oo  chart,  p.  427. 

2  Beport  of  the  Bank  Committee,  Sept.  25, 1818,  sec.  15,  F.,  Vol.  IV,  p.  908. 

*  Ibid.,  sec.  U. 

*  Thus  from  1819  to  1823  the  average  circulation  was  $4,800,000,  $4,400,000,  $5,600,000, 
and  $5,300,000  as  against  $8,400,000  in  1818.    See  Appendix  V. 


406  THE  SECOND  BANK  OP  THE  UNITED  STATES 

this  deficiency  became  Biddle's  anxious  care,  and  to  a  great 
extent  justly  so,  since  the  bank's  profit  and  the  country's 
welfare  were  equally  involved  in  the  restriction  of  the  multi- 
farious issues  of  the  state  banks.  From  this  time  the  inter- 
est in  the  currency  of  the  Bank  of  the  United  States  centers 
around  the  manner  in  which  the  problem  was  solved.  The 
difficulty  was  twofold:  the  perils  incurred  by  the  course  of 
exchange — namely,  the  danger  of  having  the  capital  of  the 
institution  shifted  to  the  West  and  South — had  to  be  over- 
come ;  and,  in  the  second  place,  some  means  had  to  be  found 
to  supply  the  corporation  with  notes.  It  was  impossible  to 
furnish  notes  sufficient  for  the  supply  of  the  West  and  South 
under  the  provision  in  the  charter  that  all  notes  must  be 
signed  by  the  president  and  cashier  of  the  parent  office.1 
Under  this  check  to  the  issues  it  was  impossible  materially 
to  expand  the  currency,  and  it  reached  a  lower  average  in 
1823  than  in  any  other  year.2  Biddle  solved  these  difficul- 
ties by  his  plan  of  dealing  largely  in  inland  exchange  while 
issuing  freely  the  bank's  notes.  By  the  buying  of  bills  when 
notes  were  issued,  a  fund  was  provided  out  of  which  the 
notes  were  paid  when  they  were  presented  at  the  Atlantic 
offices.  In  this  way  the  danger  of  having  the  bank's  capital 
shifted  to  the  West  and  South  was  avoided. 

Under  this  plan  the  note  circulation  of  the  bank  was 
materially  increased.  The  expansion  in  issues  is  very  easily 
Been  on  the  chart.  In  1827  the  increase  was  slight,  but  in 
1828  the  volume  of  the  currency  was  a  million  and  a  half 
dollars  larger  than  in  1826;  in  1829  the  increase  had  become 
$3,500,000,  and  in  1831  $9,500,000,  or  just  double  the  aver- 
age of  1826.3  By  thus  doubling  the  circulation  in  five  years 

1  H.  R.  460,  22d  Cong.,  1st  Sess.,  p.  53. 

2  In  1824  the  average  was  slightly  higher,  and  in  1825  it  was  higher  than  ever 
before  —  results  brought  about  by  the  reissue  of  some  old  notes  which  had  been 
retired.    This  supply  was,  however,  soon  exhausted. —  Ibid.,  p.  54. 

3  See  Appendix  V  and  Appendix  XII. 


ISSUES  OP  THE  BANK  407 

the  currency  of  the  Bank  of  the  United  States  at  last  became 
truly  national  and  fulfilled  the  purposes  for  which  it  was 
intended  when  the  bank  was  established.  The  notes  were 
in  excellent  repute,  and  circulated  from  Montreal  to  the  City 
of  Mexico,  the  issues  of  the  state  banks  were  restrained, 
and  the  business  of  the  country  was  carried  on  with  more 
facility  than  at  any  other  time  between  1811  and  1860. 

It  was  frequently  asserted  during  the  bank's  existence 
that  its  issues  were  excessive.  Yet,  if  they  are  compared 
with  the  sum  to  which  they  might  have  attained  under  the 
restriction  imposed  by  the  charter,  they  were  never  excess- 
ive. The  charter  permitted  a  circulation  of  notes  to  the 
extent  of  $35,000,000,  and  the  highest  sum  ever  out  was 
$25,000,000,  and  this  only  for  one  month.  The  highest  an- 
nual average  was  $22,340,000,  less  than  two-thirds  of  the 
capital  stock.  Not  until  1831,  when  three-fourths  of  the 
bank's  existence  had  passed,  did  the  issues  average  over 
$15,000,000,  or  less  than  one-half  the  amount  of  the  capi- 
tal.1 If  one  looks,  then,  to  the  legislative  restriction,  and  to 
this  alone,  it  must  be  admitted  that  the  note  issues  were 
never  excessive,  even  though  the  incitements  to  note  issues 
were  so  much  greater  at  that  time  than  they  are  now.  But, 
taking  the  issues  after  1830,  it  is  only  if  one  looks  at  nothing 
but  the  legislative  restriction  that  they  can  be  said  to  be 
limited.  One  has  here,  indeed,  only  an  illustration  of  the 
truth  that  there  is  no  definite  proportion  between  a  bank's 
capital  and  its  note  circulation.  The  attempt  to  fix  a  propor- 
tion between  them  is  absurd. 

The  distribution  of  the  circulation  is  of  interest  as  show- 
ing what  parts  of  the  Union  were  chiefly  supplied  with  a 
currency  by  the  bank.  The  figures,  of  course,  do  not  show 
actually  what  amount  of  the  bank's  notes  were  circulating  in 
the  regions  considered,  but  only  what  amounts  had  been 
issued  by  the  branches  in  these  sections. 

1  See  Appendix  V  and  Appendix  XII. 


408  THE  SECOND  BANK  OP  THE  UNITED  STATES 


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^  § 


ISSUES  OP  THE  BANK  409 

The  New  England  states  were  not  supplied  with  any 
large  part  of  their  currency  by  the  Bank  of  the  United 
States.  In  September,  1818,  the  amount  of  the  bank's  notes 
issued  in  that  section  was  a  little  less  than  one-thirteenth  of 
the  bank's  entire  note  circulation.  It  was  small  relatively 
to  the  whole  amount  issued,  and  it  was  small  considered  in 
itself,  the  sum  being  $518,415.  One  year  later  it  was  much 
less,  but  relatively  to  the  entire  circulation  it  was  a  little  in 
excess  of  one-ninth  of  the  whole.  In  January,  1823,  the 
proportion  was  about  one-eleventh,  and  in  December  of  this 
year  it  was  one-tenth.  The  issues  in  New  England  had  not 
increased  to  any  appreciable  extent,  either  relatively  or 
absolutely,  since  1818.  By  September,  1830,  the  total  had 
materially  increased,  but  not  to  anything  like  the  extent  that 
the  entire  note  circulation  had.  At  that  time  it  amounted 
to  only  one-twentieth  of  the  sum  of  the  bank's  issues.  By 
January,  1832,  the  New  England  issues  were  about  what 
they  had  been  in  1830,  and  were  only  one  twenty-ninth  part 
of  the  whole.  It  is  evident,  therefore,  that  New  England 
was  largely  outside  the  sphere  of  the  bank's  circulation.  It 
never  was  a  favorite  field  for  the  operations  of  the  institu- 
tion, and  it  grew  less  so  as  time  passed.  Undoubtedly  this 
was  largely  due  to  the  excellent  system  of  state  banks  in 
operation  throughout  New  England.  There  was  little  need 
of  a  national  bank  in  these  states. 

In  the  middle  states  the  issues  were  more  extensive.  Yet 
even  here  they  were  not  so  large  as  might  naturally  be  ex- 
pected. In  September,  1818,  not  one  dollar  in  seven  was 
issued  in  this  part  of  the  Union.  A  year  later  the  proportion 
was  more  favorable,  being  about  one  in  three,  a  result  due 
to  the  contraction  of  1818—19  which  materially  limited  the 
southern  and  western  issues.  After  this  time  the  offices  in 
the  middle  states  never  issued  so  large  a  proportion  of  the 
note  circulation.  In  1823  it  was  from  one-fourth  to  one- 


410  THE  SECOND  BANK  OP  THE  UNITED  STATES 

fifth  of  the  whole.  In  1830  it  was  still  the  same,  and  in 
1832  it  had  not  increased  to  any  marked  degree.  Consid- 
ered in  themselves,  the  sums  show  an  increase  from  about  a 
million  in  the  early  years  to  three  times  that  sum  in  1830, 
and  to  five  times  that  sum  in  1832.  On  the  whole,  how- 
ever, considering  how  extended  commercial  operations  were 
in  both  the  middle  and  New  England  states,  the  amount  of 
the  issues  in  these  sections  was  surprisingly  smalL1 

The  truth  is  that  the  sphere  of  the  bank's  operations  was 
always  considered  to  be  rather  in  the  South  and  West  than 
in  the  East  and  North,  and  the  figures  show  that  this  was 
the  case  in  respect  to  its  issues.  In  September,  1818,  over 
half  of  them  were  made  in  the  South,  meaning  by  "the 
South  "  the  branches  of  the  bank  located  in  the  states,  of  the 
original  thirteen,  south  of  Mason  and  Dixon's  line.  A  year 
later,  after  the  contraction  of  1818-19,  the  proportion  here 
was  a  little  less  than  one-third  of  the  whole,  and  the  total, 
considered  absolutely,  had  fallen  off  in  a  remarkable  manner. 
In  January,  1823,  the  issues  were  again  over  half  the  total  cir- 
culation, but  did  not  reach  nearly  so  high  a  figure  as  in  1818. 
In  1830  the  proportion  exceeded  one-fourth,  but  the  abso- 
lute amount  of  the  issues  was  greater  than  ever  before. 
There  is  a  further  large  increase  in  1832,  but  the  propor- 
tion remained  about  the  same.  These  facts  show  that  the 
South  was  in  the  beginning  the  principal  field  of  the  bank's 
operations,  and  that  it  remained  until  the  end  a  very  impor- 
tant one.  The  reason  for  its  smaller  relative  importance  at 
a  later  date  is  to  be  found  in  the  great  extension  of  the 
bank's  dealings  in  the  Southwest  and  West. 

As  regards  these  sections  there  was  a  slightly  different 
course  of  affairs.  The  Southwest  was  represented  in  the 
early  years  of  the  institution  only  by  the  great  office  at  New 
Orleans.  Its  issues  were  very  extended  and  usually  exceeded 

i  See  table  of  figures  for  the  circulation  of  the  bank  at  various  periods,  p.  408. 


ISSUES  OF  THE  BANK  411 

the  sum  of  all  those  made  in  New  England.  But  it  was  not 
until  after  1827  that  the  Southwest  became  an  especially 
important  territory  for  the  bank's  issues.  In  September, 
1830,  the  total  of  the  note  issues  was  only  a  little  over  a 
half  million  less  than  that  of  the  southern  offices.  In  1832 
the  same  continued  to  be  the  case,  the  offices  of  New  Or- 
leans, Mobile,  and  Natchez  issuing  a  full  fourth  of  all  the 
notes  emitted. 

In  the  West — strictly  speaking,  at  the  Kentucky,  Tennes- 
see, and  Ohio  branches — the  issues  followed  about  the  same 
course  as  in  the  Southwest.  In  September,  1818,  they  ag- 
gregated about  one-eighth  of  the  whole,  being  almost  equal 
to  the  sum  of  the  issues  in  the  middle  states.  In  propor- 
tion to  the  population  and  commercial  interests  of  these  new 
states  this  circulation  was  enormous.  It  was  in  respect  to 
the  West,  therefore,  that  the  most  energetic  efforts  were 
made  to  restrict  the  circulation.  In  September,  1819,  the 
total  was  not  one-third  that  of  the  year  previous,  and  in  pro- 
portion to  the  entire  note  circulation  was  less  than  one- 
fifteenth  of  the  whole.  By  January,  1823,  the  active  west- 
ern offices  issued  only  $45,820,  and  in  December  of  the  same 
year  only  $16,785 — insignificant  sums  which  hardly  permit 
one  to  speak  of  western  issues.  After  1827,  however,  as  a 
result  of  the  invention  of  branch  drafts  and  the  new  plan  of 
extensive  operations  in  exchange,  the  change  is  remarkable. 
In  September,  1830,  the  issues  were  over  $3,600,000 — an 
amount  in  excess  of  that  issued  in  the  middle  states  and 
almost  equal  to  the  sum  of  those  of  the  middle  and  New 
England  states  taken  together.  The  proportion  is  a  little 
less  than  one-fourth  of  the  whole,  and  this  proportion  is  re- 
tained in  1832,  which  year  shows  a  great  increase  in  the 
issues  of  the  West,  the  amount  being  over  $5,000,000. 

From  this  analysis  it  is  seen  that  the  South  was  for  one- 
half  the  bank's  existence  the  principal  field  for  the  note 


412  THE  SECOND  BANK  OP  THE  UNITED  STATES 

issues.  After  1827  the  West  and  Southwest  rise  to  about 
equal  importance.  Taking  Southwest  and  West  together, 
their  total  issues  equal  about  one-half  of  the  whole.  Taking 
South,  Southwest,  and  West  together,  in  comparison  with 
the  New  England  and  the  middle  states,  these  sections  in 
September,  1818,  had  almost  four  times  as  great  a  note  cir- 
culation; in  September,  1819,  it  was  a  little  over  that  of  the 
East  and  North ;  in  1823  it  was  more  than  double ;  in  Sep- 
tember, 1830,  it  was  three  times  greater,  and  had  increased 
from  $3,400,000  in  1823  to  $11,400,000.  In  1832  the  pro- 
portion was  not  so  great,  though  the  increase  since  1830 
was  larger  than  during  any  other  two  years  of  the  bank's 
history. 

There  were,  of  course,  many  excellent  reasons  for  this 
state  of  affairs,  but  the  principal  reasons  can  be  given  in 
one  sentence:  Banking  transactions  in  these  regions  were 
more  profitable  than  elsewhere  and  the  demand  for  note 
issues  was  greater.  But  at  the  bottom  of  these  facts  lay  a 
serious  danger  to  the  bank.  It  will  not  escape  notice  that 
at  the  periods  of  great  expansion,  which  were  also  periods 
of  embarrassment  to  the  Bank  of  the  United  States,  the 
expansion  of  the  currency  in  these  sections  was  especially 
noteworthy.  The  two  periods  of  greatest  expansion  are 
marked  by  the  years  1818  and  1832,  and  both  these  years 
saw  the  bank  hard  pressed  to  get  command  of  its  means. 

In  1818-19,  as  clearly  shown  in  the  second  chapter,  the 
note  issues  of  the  South  and  West  ran  steadily  in  enormous 
streams  to  the  East  and  North  and  were  redeemed  there. 
The  southern  and  western  branches  could  not  and  did  not 
furnish  means  for  their  redemption.  On  the  contrary,  they 
poured  out  ever-increasing  volumes  of  notes  in  response  to 
an  incessant  demand  for  more  currency.  This  simply  meant 
that  the  southern  and  western  borrowers  invested  the  loans 
made  by  the  bank  in  permanent  improvements,  and  conse- 


ISSUES  OF  THE  BANK  413 

quently  could  not  pay  their  debts  when  these  became  due.1 
A  similar  state  of  affairs  existed  in  1832.  Under  Biddle's 
system,  which  became  thoroughly  effective  in  1827,  the 
business  of  the  West  and  Southwest  had  been  increased 
enormously,  and  there  was  naturally  an  immense  stimulus  to 
the  note  issues.  Again  loans  which  were  virtually  perma- 
nent were  made ;  again  the  immense  mass  of  notes  running 
to  the  eastern  offices  embarrassed  the  bank,  which  could 
only  with  great  difficulty  find  the  means  with  which  to 
redeem  them ;  again  the  West  was  called  upon  to  settle,  and 
again  immediate  settlement  was  found  impossible. 

From  Nashville  the  cashier  of  the  branch  writes  that  all 
bills  offered  for  collection  are  renewed.2  The  situation  at 
New  Orleans  was  precisely  similar,3  while  at  Louisville  the 
cashier  admitted  that  the  embarrassments  of  the  branch  were 
caused  by  a  too  great  extension  of  its  credit,*  and  that  bills 
sent  to  Louisville  for  collection  were  not  collected  but 
renewed.  So,  too,  the  cashier  at  Cincinnati  remarks  that 
"as  fast  as  good  bills  of  exchange  are  offered  to  be  applied 
to  discounted  notes  they  are  purchased."  5 

And  yet,  while  the  West  could  not  discharge  its  debts, 
and  while  the  circulation  there  was  far  in  excess  of  any  sum 
it  had  ever  before  attained,  the  cry  was  still  for  more  cur- 
rency. The  cashier  at  Nashville  declares  that  "the  scarcity 
of  money"  in  Alabama  and  Tennessee  is  "unexampled," 
and  that  "no  portion  of  the  Union  contains  a  more  suffer- 
ing population,  for  lack  of  circulating  medium,  than  does 
the  portion  of  which  this  office  is  the  focus." 6  Yet  in  April 
the  circulation  credited  to  the  Nashville  office  was  $1,609,- 
000 — a  note  circulation  greater  than  that  of  any  other  office 
except  those  of  Philadelphia  and  New  Orleans.  The  cashier 

i  On  April  1, 1819,  the  debt  due  in  Kentucky  and  Ohio  was  $6,351,000.— CHEVES,  p. 
27,  and  MILES.,  Vol.  XXIII,  p.  94. 

2£T.  R.  121,  22d  Cong.,  2d  Sess.,  p.  150,  Oct.  21, 1832.          3  ibid.,  p.  47,  Nov.  24, 1832. 
*  Ibid.,  p.  145,  Nov.  18, 1832.         5  ibid.,  p.  148.         6  /& id.,  pp.  150, 151,  Oct.  21, 1832. 


414  THE  SECOND  BANK  OF  THE  UNITED  STATES 

at  Cincinnati  utters  like  complaints,  asserting  that  the 
"demand  for  money"  is  "enormous,"1  though  in  April  the 
circulation  of  the  Cincinnati  branch  was  in  excess  of  $1,100,- 
000.  What  had  become  of  this  enormous  mass  of  notes  ?  To 
this  question  the  response  was  that  it  had  passed  to  the  East. 

It  is  plain,  then,  that  the  demand  in  the  West  was  not 
for  a  circulating  medium,  but  for  capital.  It  was  a  demand 
for  means  to  make  what,  in  the  nature  of  the  case,  would  be 
permanent  investments,  for  means  to  assist  in  developing  a 
new  country.  Had  the  issues  fulfilled  the  real  duties  of  a 
currency  there  would  have  been  no  such  demand  for  "a  cir- 
culating medium."  The  truth  was  frankly  and  innocently 
expressed  by  Senator  Ewing,  when  he  said:  "In  these  sec- 
tions of  our  country,  capital — accumulated  capital — does 
not,  and,  in  the  very  nature  of  things,  cannot,  exist;  and 
there,  of  all  places  else,  is  there  need  of  capital  to  sustain 
the  enterprise  and  aid  the  industry  of  the  people." 2 

Two  of  the  most  important  questions  about  any  paper 
currency  are  these:  Is  it  truly  convertible?  Is  it  elastic? 
The  provisions  of  the  charter  show  that  the  paper  issues  of 
the  bank  were  legally  redeemable  in  specie  on  demand. 
This  is  convertibility,  but  there  are  many  degrees  of  con- 
vertibility. The  paper  may  be  redeemable  at  a  distant 
point ;  or  the  business  habits  of  the  community  may  be  such 
as  to  embarrass  individuals  who  wish  to  convert  paper  into 
specie ;  or  means  may  be  used  by  a  bank  which  will  hinder 
most  men  from  any  attempt  to  get  specie  for  the  paper  which 
they  hold.  In  any  of  these  cases  convertibility  is  only 
partial,  and  in  any  of  them  depreciation  is  likely  to  result. 
One  must,  therefore,  examine  the  conditions  under  which 
the  paper  of  the  Bank  of  the  United  States  was  redeemable 
with  these  considerations  in  mind. 

i£T.  R.  121,  22d  Cong.,  2d  Sess.,  p.  149,  Nov.  21, 1832. 
2  C.  D.,  Vol.  VIII,  Part  I,  p.  1255,  July  11, 1832. 


ISSUES  OF  THE  BANK  415 

The  issues  of  the  bank  were  at  their  best  in  the  first  year 
of  its  existence.  As  the  bank  could  not  suspend  specie  pay- 
ments, and  as  its  notes  were  receivable  in  all  payments  due  the 
government,  the  credit  of  these  notes  was  excellent  from  the 
beginning.  A  third  circumstance  made  convertibility  fairly 
complete.  Each  office  of  the  bank  received  the  notes  of 
all  the  other  offices  at  par.  The  results  were  excellent.  As 
today  everyone  accepts  a  national-bank  note  without  caring 
to  ascertain  where  it  was  issued,  so  at  that  time  everyone 
willingly  accepted  a  note  of  the  Bank  of  the  United  States, 
because  wherever  there  was  a  branch  the  note  would  be  re- 
deemed at  its  face  value.  Indeed,  such  notes  were  even 
superior  to  specie  for  the  purpose  of  remittance.  Under 
these  circumstances  there  could  be  no  depreciation. 

Unfortunately  the  business  conditions  existing  in  the 
United  States  were  such  that  this  excellent  condition  of  the 
currency  could  not  continue,  and,  as  already  pointed  out,  the 
management  decided  in  August,  1818,  that  the  universal 
receivability  of  the  notes  should  cease.  Henceforth  the 
notes  were  to  be  redeemed  only  where  issued.1  There  were 
now  nineteen  distinct  currencies  of  the  Bank  of  the  United 
States,  and  to  a  considerable  extent  the  country  lost  one  of 
the  principal  benefits  sought  in  the  establishment  of  the 
bank.  The  currency  was  not  completely  convertible,  and 
this  want  of  complete  convertibility  manifested  itself  in 
depreciation  of  the  notes.  This  began  with  the  order  con- 
cluding their  universal  receivability,  namely,  in  August, 
1818,  and  lasted  until  the  bank  went  out  of  existence.  The 
depreciation  was  not  always  the  same.  In  1819,  for 
instance,  the  bank  restored  the  quality  of  universal  redeem- 
ability  in  respect  to  its  five-dollar  notes,2  and  this,  of  course, 
diminished  the  rate  of  depreciation  materially. 

1 F.,  Vol.  Ill,  p.  367.  The  offices  were  not  to  pay,  or  receive  in  payment  of  debts, 
or  on  deposit,  any  notes  but  their  own. 

2 Order  of  October  16, 1819,  MILES,  Vol.  XVII,  p.  115 ;  F.,  Vol.  Ill,  pp.  906, 909,  sec.  15. 


416  THE  SECOND  BANK  OF  THE  UNITED  STATES 

Immediately  after  the  order  to  cease  receiving  the  notes 
of  each  branch  indiscriminately  at  every  branch,  the  notes 
were  quoted  at  a  discount.  Exact  figures  are  available  only 
in  the  case  of  Philadelphia.  On  September  7,  1818,  all 
branch  notes  were  at  a  discount  of  1  per  cent,  in  that  city, 
and  they  remained  at  this  rate  of  depreciation  until  March  1, 
1819,  when  they  were  quoted  at  £  per  cent,  discount.  In 
July  the  quotation  was  even  more  favorable,  being  £  per 
cent.  At  this  figure  they  remained  for  the  next  four  years. 
On  March  3,  1823,  the  depreciation  at  Philadelphia  was  ^ 
per  cent.,  and  on  the  2d  of  June  in  that  year  it  was  £  per 
cent.1  At  this  rate  it  remained  until  July,  1824,  when  all 
depreciation  on  small  notes  ceased  so  far  as  Philadelphia 
was  concerned,  and  the  depreciation  on  large  notes  expired 
with  the  year.  This  result  was  due  to  the  policy  now 
adopted  of  receiving  all  notes  at  par  in  Philadelphia.2 

The  figures  given  for  depreciation  during  this  period  are 
for  the  branch-bank  notes  generally.  The  issues  of  Boston, 
Middletown,  and  Portsmouth  were  at  an  even  greater  dis- 
count. In  September,  1820,  these  were  depreciated  4  per 
cent,  in  Philadelphia,  and  2  per  cent,  all  through  1821,  and 
until  June,  1822.3  On  the  4th  of  that  month  they  were  equal 
in  value  to  other  branch  notes.  Why  the  paper  of  these 
branches  should  have  suffered  greater  depreciation  than  that 
of  the  others  it  is  not  possible  to  say. 

The  recovery  of  the  complete  credit  of  branch  notes  at 
Philadelphia  after  six  years  of  depreciation  was  confined  to 
that  city.  In  the  other  towns  and  cities  where  the  bank 
had  branches  the  notes  were  still  worth  less  than  their  face 
value.  Thus  McDuffie,  though  he  asserted  that  the  notes  of 
the  branches  were  paid  "  everywhere  indiscriminately," 

1  See  Appendix  XI  for  the  figures. 

»  "  1823.    The  Bank  of  the  United  States  receives  the  notes  of  all  its  branches." 
— GOUGE  (Cobbett's  edition),  p.  136. 
3  See  Appendix  XI. 


ISSUES  OF  THE  BANK  417 

admitted  in  his  report  of  1830  that  there  was  sometimes  a 
discount,  though  it  was  never  equal  to  the  cost  of  transport- 
ing specie.1  In  1833  it  was  proved  conclusively  that  at 
Baltimore  from  1820  the  office  had  not  received  the  paper 
of  other  branches  at  par  from  state  banks,  and  the  notes  had 
consequently  always  been  at  a  discount.2  This  ceased  with 
October,  1833,  when  the  bank  adopted  the  policy  of  receiv- 
ing all  its  notes  at  par  from  state  banks  along  the  Atlantic 
coast.  The  condition  of  affairs  in  New  York  was  the  same. 
The  office  refused  branch  notes  from  state  banks  and  the 
notes  were  commonly  depreciated  ^  per  cent.  For  fifteen 
years  brokers  had  bought  these  notes  from  state  banks  at  a 
discount  of  from  J  to  ^  per  cent.,  and  had  then  sold  them  at 
a  smaller  discount  to  merchants  having  duty  bonds  to  pay. 
The  latter  parted  with  them  to  the  Bank  of  the  United  States 
at  par.  This  was  true  in  respect  to  all  but  five-dollar  notes, 
which  were  taken  at  their  face  value.  Notes  of  other  de- 
nominations were  called  "  uncurrent,"  because  they  were  not 
so  received.  Nevertheless  such  notes  were  taken  by  the 
state  banks  from  individuals  at  par  on  deposit,  or  in  pay- 
ment of  debt.8  At  Mobile  in  Alabama  the  same  conditions 
applied  to  the  notes  of  the  branches.4  Nor  was  this  all.  It 
is  certain  that  some  branches  sometimes  refused  to  receive 
the  notes  of  other  branches  even  at  a  discount,  a  fact  which 
would  make  such  paper,  if  far  from  its  place  of  issue,  vir- 
tually irredeemable.  President  Biddle's  testimony  corrobo- 
rated the  testimony  of  others.  He  declared  that  all  notes  of 
five  dollars  were  received  indiscriminately  at  all  the  branches 
of  the  bank;  notes  of  a  larger  denomination  were  not  neces- 
sarily, but  usually,  received  at  their  face  value;  all  notes 
offered  on  account  of  government  were  of  course  received  at 

i  C.  D.,  Vol.  VIII,  Part  II,  p.  1877,  and  H.  R.  358,  21st  Cong.,  1st  Sess.,  pp.  14, 15. 
2S.  D.  24,  23d  Cong.,  1st  Sess.,  pp.  6,  7.  3  Ibid.,  pp.  9-12. 

*/6td.,  p.  4.    Letter  from  branch  of  Bank  of  the  State  of  Alabama,  November 
4,1833. 


418  THE  SECOND  BANK  OF  THE  UNITED  STATES 

par;  the  branch  issuing  the  notes  paid  all  of  them  on  de- 
mand at  par,  as  also  did  the  parent  office  at  Philadelphia.1 

The  conclusions  which  one  is  justified  in  deducing  from 
the  above  facts  may  be  summarized  as  follows:  There  was 
always  depreciation  after  1818.  This  depreciation,  however, 
varied,  being  greater  from  1818  to  1825  than  it  was  later. 
Moreover,  the  paper  was  depreciated  because  it  wandered  far 
from  its  place  of  issue  and  redemption,  not  because  it  was 
irredeemable.  The  amount  of  depreciation,  however,  was  in- 
considerable, ranging  from  1  per  cent,  in  the  early  years  to 
^  and  ^  per  cent,  in  the  later  years  of  the  bank.2  All  notes, 
moreover,  were  redeemable  at  Philadelphia  as  well  as  at  their 
place  of  issue;  all  notes  of  five  dollars  were  receivable  at  par 
everywhere;  frequently  all  notes  of  all  denominations  were 
received  at  all  the  offices  from  individuals,  but  not  from  banks; 
all  were  receivable  in  payment  of  government  dues.  Finally, 
all  notes  might  be,  and  sometimes  were,  refused,  except  at  the 
places  where  made  payable. 

Now,  this  is  not  true  convertibility.  The  currency  was 
sound  enough ;  it  was  uniform  enough ;  but  a  part  of  it  did 
not  circulate  at  its  face  value  except  in  the  immediate  neigh- 
borhood of  its  place  of  issue.  However,  when  the  facts 
are  justly  weighed,  the  matter  in  the  later  years  of  the 
bank's  existence  was  insignificant.  All  the  five-dollar  notes 
were  at  par,  and  these  constituted  one-sixth  of  the  entire  cur- 
rency of  the  bank,  and  were  equal  in  value  to  two-thirds  of 
its  ten-dollar  notes.3  Fives  and  tens  comprised  by  all  odds 
the  greater  part  of  the  bank's  circulation,  so  far  as  the  usual 
transactions  between  individuals  were  concerned,  and  the 
notes  in  the  hands  of  individuals  usually  passed  at  their  face 

1  S.  D.  79,  22d  Cong.,  1st  Sess.,  p.  3,  and  8.  D.  98,  22d  Cong.,  1st  Sess.,  p.  3. 

2  Except  in  the  case  of  the  New  England  offices. 

3  GALLATIN,  Considerations  on  the  Currency  and  Banking  System  of  the  United 
States,  p.  57.    See  also  ADAMS,  Gallatin's  Writings,  Vol.  III.    This  was  for  the  year 
1829.    There  is  no  reason  to  suppose  that  the  proportion  ever  decreased. 


ISSUES  OP  THE  BANK  419 

value.  Not  only  so,  but  the  state  banks  took  them  from  their 
customers  at  par;  so  did  the  Bank  of  the  United  States, 
and  the  government  received  all  of  them  at  their  face  value. 
Consequently,  in  ordinary  circumstances,  depreciation  could 
hardly  have  existed  as  between  individuals.  It  might  be 
concluded  then  that,  though  convertibility  was  not  com- 
plete, though  notes  of  over  five  dollars  were  below  par  when 
they  circulated  outside  of  the  immediate  vicinity  of  the 
branch  which  issued  them,  yet  the  currency  was  as  convert- 
ible as  possible  under  the  system  in  use.  This  Gallatin 
asserted,  saying  that  the  paper  of  the  Bank  of  England  in 
like  circumstances  suffered  an  equal  depreciation.1  Yet  this 
conclusion  is  not  quite  borne  out  by  the  facts,  for  after 
October,  1833,  the  bank  received  its  paper  from  many  state 
banks  at  par,  and  this  immediately  improved  its  character. 
The  currency,  therefore,  admitted  of  improvement.2 

Moreover,  there  is  another  important  point  to  be  noted  in 
reference  to  the  convertibility  of  the  bank's  issues.  The 
business  habits  of  the  day  were  hostile  to  payments  of  specie 
for  bank  notes,  and  it  was  very  unusual  for  specie  to  be  drawn 
from  banks  in  exchange  for  their  notes.  Raguet  complains 
of  this  fact  in  1820,  and  declares  that  while  it  exists  there  is 
no  real  safeguard  against  an  inconvertible  paper  currency.3 
Crawford  also  lays  stress  upon  this  condition  of  affairs.* 
That  it  applied  in  the  case  of  the  bank  and  lasted  all  through 
its  history  is  well  known.  Nor  would  public  opinion  support 
the  individual  who  demanded  the  payment  of  obligations  in 
specie.  Banks  refused  accommodations  to  men  of  this  class, 

1  Considerations  on  the  Currency,  p.  341. 

2  The  principal  objection  to  the  bank's  notes  was  that  of  their  not  being  receiv- 
able from  the  state  banks.    The  charter  in  1832  had  a  clause  compelling  the  bank  to 
receive  all  its  notes  from  state  banks  in  payment  of  debts.—  See  Appendix  IV,  sec.  4 
of  the  bill. 

3  RAGUET,  On  Banking,  p.  297,  report  to  Pennsylvania  senate,  Jan.  29, 1820. 

*  Crawford  to  Senate  Committee  on  Finance,  Dec.  29, 1818,  F.,  Vol.  Ill,  p.  394; 
and  report  to  House  of  Representatives,  Feb.  24, 1820,  ibid.,  p.  496. 


420  THE  SECOND  BANK  OP  THE  UNITED  STATES 

and  very  few  were  bold  enough  or  strong  enough  to  stand 
out  against  a  pressure  so  powerful  as  the  combined  forces  of 
public  opinion  and  the  refusal  of  bank  accommodations.1 
The  same  conditions  existed  among  bankers  themselves. 

Consequently  there  was  no  immediate,  automatic  check 
upon  the  issues  of  the  bank  —  a  check  which  is  absolutely 
necessary  where  a  paper  currency  is  almost  entirely  used. 
Otherwise  there  is  nothing  to  hinder  inflation  except  the 
demand  for  specie  abroad.  This  was  the  case  with  the  cur- 
rency of  the  United  States  during  the  entire  existence  of 
the  bank.  The  result  was  that  the  currency  was  apt  to  be 
unduly  expanded  at  one  time,  and,  when  the  foreign  check 
came,  unduly  contracted.2  As  deposits  were  little  used,  the 
whole  business  of  the  country  commonly  suffered  severely  at 
every  contraction  and  was  unhealthily  stimulated  at  every 
expansion.  The  currency,  moreover,  was  not  composed  suffi- 
ciently of  specie  to  make  it  in  any  degree  stable,  the  amount  of 
specie  ranging  from  about  one-sixth  to  one-eighth  of  the 
whole,  most  of  it  held  by  the  banks  as  a  reserve.3 

It  was  the  opinion  of  the  Senate  Committee  on  Finance 
in  1830,  however,  that  the  currency  had  "  for  some  years 
past  ....  been  improving  by  the  infusion  into  the  circu- 
lating medium  of  a  larger  portion  of  coin,  and  the  substitu- 
tion of  the  paper  of  more  solvent  banks  in  lieu  of  those  of 
inferior  credit ;"  and  that  the  inconveniences  still  remaining 

1  RAQUET,  On  Banking,  p.  102. 

2  "There  is  no  example  in  history  of  a  currency  similar  to  that  of  the  United 
States.    It  is  banknotes  issued  without  restraint,  unless  when  a  high  rate  of  foreign 
exchange  prevails 

"The  existence  of  a  legal  right  to  convert  banknotes  into  coin,  is  specious 
and  imposing,  inviting  the  judgment  to  conclude  that  it  must  be  an  effective  restraint 
upon  over-issues :  but  the  authority  which  we  possess  to  demand  coin  is  essentially 
different  in  its  effects  from  an  indispensable  necessity  constantly  and  daily  to  require 
coin."— C.  P.  White,  report  of  the  Select  Committee  on  Coins,  Feb.  19, 1834,  H.  R.  278, 
23d  Cong.,  1st  Sess.,  p.  24. 

3  See  Triennial  Report  of  the  Bank  of  the  United  States,  1831,  NILES,  Vol.  XLI,  p. 
115.    Here  the  committee  speaks  of  "  the  great  mass  of  the  precious  metals  "  lying 
"  accessible  in  the  banks  of  the  Atlantic  cities." 


ISSUES  OP  THE  BANK  421 

would  "  be  wholly  and  insensibly  remedied "  in  a  brief 
period.1  The  currency  was  certainly  sounder  in  that  year 
than  it  had  been  since  the  war  of  1812,  but  no  remarkable 
improvement  took  place,  and  when  it  became  certain  that 
the  Bank  of  the  United  States  would  not  be  re-chartered  the 
licentious  issues  of  the  state  banks  increased  instead  of 
diminishing  the  unsound  condition  of  the  mass  of  the  cur- 
rency. The  whole  situation  is  tersely  expressed  in  an  oft- 
quoted  extract  from  a  speech  of  Webster's  in  favor  of  the 
bank: 

Our  system,  as  a  system,  dispenses  too  far,  in  my  judgment, 
with  the  use  of  gold  and  silver It  is  true  that  our  circulat- 
ing paper  is  all  redeemable  in  gold  and  silver.  Legally  speaking, 
it  is  all  convertible  into  specie  at  the  will  of  the  holder.  But  a 
mere  legal  convertibility  is  not  sufficient.  There  must  be  an  actual, 
practical,  never-ceasing  convertibility.  This,  I  think,  is  not,  at 
present,  sufficiently  secured.2 

The  paper  of  the  bank  was,  therefore,  far  from  being 
convertible  in  the  full  sense  of  that  term.  The  process  of 
getting  specie  on  demand  was  too  difficult  to  be  persisted  in 
by  most  men,  and  the  notes  were  depreciated  to  a  slight 
extent  because  payable  only  where  issued.  Consequently  the 
paper  currency  of  the  day  admitted  of  considerable  improve- 
ment, and  the  efforts  of  men  who  wished  a  better  currency — 
men  of  whom  Benton  was  a  type — were  to  a  considerable 
extent  justified  by  the  conditions. 

But  it  must  never  be  forgotten  that,  while  the  paper  of 
the  Bank  of  the  United  States  was  not  in  as  good  a  state 
as  it  might  have  been,  it  was  still  far  preferable  to  the  paper 
of  the  state  banks,  and  that  the  choice  at  the  time  lay 
between  the  issues  of  the  two  systems.  In  such  circumstances 
a  sensible  man  could  not  hesitate  which  to  choose.  The  state 
banks  poured  out  streams  of  paper  of  a  smaller  denomina- 
tion than  $5,  even  as  low  as  $1 — paper  that  was  redeemable 

1 8.  D.  50, 22d  Cong.,  1st  Sess.,  p.  23.          2  <?.  #.,  vol.  VIII,  Part  I,  p.  958,  May  25, 1832. 


422  THE  SECOND  BANE  OF  THE  UNITED  STATES 

only  at  the  place  of  issue,  and  which  had  hardly  any  cur- 
rency elsewhere ;  paper  which  was  frequently  not  redeemable 
even  where  issued;  paper  of  all  degrees  of  credit.  On  a 
just  review  of  all  that  was  done  and  all  that  had  to  be  faced, 
the  Bank  of  the  United  States  is  not  censurable  for  the 
fact  that  its  paper  was  not  completely  redeemable.  The 
currency  was  infinitely  better  than  that  supplied  before  the 
establishment  of  the  bank;  it  was  much  better  than  any 
other  paper  after  that  event ;  and  it  was  gladly  taken  every- 
where throughout  the  country.  One  may  justly  conclude 
with  Gallatin  that  the  bank  was,  in  the  circumstances  of  that 
day,  the  only  means  to  insure  "a  sound  currency"  and  "a 
just  performance  of  contracts."1 

The  banking  methods  of  that  time  made  the  question  of 
elasticity  one  of  far  greater  import  than  it  is  nowadays, 
because  the  important  element  of  the  circulation  now  con- 
sists of  the  deposits;  then  it  consisted  of  the  note  issues  of 
banks.  This  fact  is  the  significant  one  in  every  comparison  of 
banking  operations  then  and  now,  but  in  no  consideration  is  it 
more  important  than  in  this  of  the  elasticity  of  the  currency. 

The  bank's  advocates  always  claimed  for  it  the  particular 
virtue  of  furnishing  an  elastic  currency.  One  of  the  great- 
est advantages  of  its  paper,  said  the  Senate  Committee  on 
Finance  in  1830,  is  "that  it  bears  a  proper  relation  to  the 
real  business  and  exchanges  of  the  country ;  .  .  .  .  increas- 
ing with  the  wants  of  the  active  operations  of  society,  and 
diminishing  as  these  subside,  into  comparative  inactivity."2 
The  claim  was  certainly  not  baseless.  The  bank's  organiza- 
tion made  its  issues  much  more  elastic  than  those  of  the 
present  national  banks,  or  than  those  of  state  banks.  Only 
through  a  system  of  branches,  such  as  the  Bank  of  the 
United  States  possessed,  can  a  bank  currency  be  completely 

1  Gallatin  to  Robert  Walsh,  Jr.,  April  27,   1830,  ADAMS,  Gallatiri's    Writings, 
Vol.  II,  p.  426. 

2  8.  D.  50, 22d  Cong.,  1st  Sess.,  p.  23. 


ISSUES  OF  THE  BANK  423 

elastic,  for  it  is  only  so  that  the  currency  needed  can  imme- 
diately be  supplied  where  it  is  wanted.  Moreover,  it  is 
apparent  that  a  great  bank  with  a  large  capital  under  its 
control  can  meet  local  demands  much  more  easily  and  safely 
than  a  small  bank.  Particularly  would  such  a  bank  meet 
the  demands  for  a  currency  of  small  towns  and  villages — a 
demand  which  in  many  instances  cannot  now  be  met.  On 
the  other  hand,  the  bank's  connection  with  the  government 
at  times  seriously  affected  the  complete  elasticity  of  its 
issues-.  Thus,  whenever  a  portion  of  the  national  debt  was 
discharged,  the  bank  was  called  upon  for  large  sums  of 
specie.  At  such  times  a  contraction  of  the  issues  was  likely, 
and  the  property  of  elasticity  was  seriously  interfered  with. 
Again,  when  the  government  revenues  yielded  a  surplus,  the 
bank  had  on  its  hands  an  enormous  amount  of  capital  for 
which  some  use  had  to  be  found.  Acting  under  the  stimulus 
of  the  necessity,  an  expansion  in  the  business  of  the  bank 
then  took  place,  and  there  were  over-issues  of  its  paper. 

It  may  be  argued  that  over-issues  could  not  occur  so  long 
as  the  currency  was  redeemable  on  demand  in  specie,  or,  if 
they  could  occur,  only  a  temporary  and  immediately  cor- 
rected expansion  would  ensue.  The  opinion  expressed  by 
President  Biddle  was  that  a  paper  currency,  redeemable  in 
specie  on  demand,  can  never  be  long  redundant,  because  an 
approach  to  redundancy  will  lead  at  once  to  a  foreign 
demand  for  the  precious  metals ;  to  an  exportation  of  specie ; 
to  a  rise  in  its  price;  to  an  immediate  redemption  of  notes 
in  order  to  obtain  silver  and  gold,  and  hence  to  an  effective 
check  upon  over-issues.1  Meanwhile,  however,  the  currency 
had  been  redundant ;  a  considerable  time  had  been  necessary 
to  correct  the  error,  and  therefore  complete  elasticity  did  not 
exist.  There  were  two  reasons  for  this  state  of  affairs:  the 
public  opinion  of  the  country  was  hostile  to  the  practice  of 

i  Article  in  the  National  Gazette  of  Philadelphia,  April  10, 1828.  See  for  extracts 
GOUGE  (Cobbett's  edition),  pp.  150-55. 


424  THE  SECOND  BANK  OF  THE  UNITED  STATES 


drawing  specie  from  the  bank,  and  the  rule  which  allowed  specie 
to  be  paid  out  only  at  the  bank  and  the  issuing  offices  inter- 
fered with  the  frequent  presentation  of  the  notes.  In  these 
circumstances,  unhealthy  expansions  in  the  currency  were 
not  only  probable,  but  inevitable. 

Consequently,  if  the  mass  of  the  bank's  paper  was  to  be 
completely  elastic,  some  other  effective  means  had  to  be 
found  for  returning  the  note  circulation  upon  the  bank  when 
the  transactions  upon  which  it  was  issued  had  ceased.  One 
means  was  provided  in  the  payments  made  to  the  govern- 
ment. Tariff  dues  were  collected  at  all  the  seaports ;  enor- 
mous sums  came  in  through  the  land  offices  and  also 
through  the  post-offices.1  All  these  payments  were  made 
into  the  Bank  of  the  United  States,  and  most  of  them  in 
notes  issued  by  that  bank.  Here  was  a  ceaseless  and  an  ever- 
efficient  means  of  retiring  its  issues.  Another  resulted  from 
the  course  of  trade  in  the  United  States.  There  was  always 
a  flow  of  the  bank's  circulation  from  the  West  and  South  to 
the  Atlantic  cities  of  the  North  and  East,  a  consequence  of 
the  commercial  relations  of  these  sections  to  one  another,  which 
made  the  West  and  South  debtors  to  the  East  and  North. 
The  amount  of  notes J  received  in  a  single  year  at  the  Atlan- 

i"The  government  receives  its  revenues  from  343  customs  houses;  42  land 
offices ;  8,004  post  offices ;  134  receivers  of  internal  revenue ;  37  marshals ;  33  clerks  of 
courts."— Report  of  the  Finance  Committee  of  the  Senate,  March  29. 1830,  S.  D.  50, 
22d  Cong.,  1st  Sess.,  p.  21.  According  to  this  report  the  government  received  from 
these  sources  in  the  ten  years  preceding  Jan.  1, 1830,  $230,068,000. 

2  Amounts  of  branch  notes  received  at  the  offices  at  Boston,  New  York,  Phila- 
delphia, and  Baltimore : 


1828 

1829 

1830 

1831 

1832 

Boston  

$  1,010,000 

$  1,844,000 

$1,794,000 

$  1,816,000 

$  2,249,000 

New  York  

11,938,000 

11,294.000 

9,168,000 

12,284,000 

13,542,000 

Philadelphia  

4,453,000 

4,106.000 

4,579.000 

5,398,000 

6,789,000 

Baltimore  

1,497,000 

1,420,000 

1,376,000 

1,588,000 

1,601,000 

Totals  

$18,898,000 

$18,664,000 

$16,917,000 

$19,086,000 

$24,181,000 

For  1828  to  1831  see  H,  R.  460,  22d  Cong.,  1st  Sess.,  p.  534;  for  1832,  S.  D.  82,  22d  Cong., 
2d  Sess.,  p.  3. 


ISSUES  OP  THE  BANK  425 

tic  offices,  largely  as  a  result  of  the  course  of  the  exchanges, 
was  very  large.  In  addition  a  great  deal  of  paper  was 
received  by  the  inland  offices.  In  these  ways  millions  of 
dollars  in  the  notes  of  the  bank  were  retired  every  month. 
The  paper  taken  up  in  1832  by  offices  which  had  not  issued 
it  amounted  to  about  forty  million  dollars.1  What  amount 
of  their  own  individual  issues  the  offices  received  is  not 
stated.  It  must,  however,  have  been  considerable.  As  the 
note  circulation  in  1832  averaged  about  twenty  million  dol- 
lars, it  is  evident  that  at  least  twice  its  volume  was  redeemed 
in  that  year.  It  is  probable  that  this  rule  would  hold  good 
for  most  years.  Thus  there  was  a  constant  redemption  and 
a  constant  renewal  of  the  issues,  which  insured  a  very  con- 
siderable degree  of  elasticity. 

Speaking  generally,  then,  it  can  be  said  that  the  issues 
were  elastic,  and  a  consideration  of  the  issues  and  deposits, 
as  revealed  by  the  accompanying  chart,  will  add  something 
specific  to  this  general  conclusion.  The  first  evidence,  con- 
clusive in  itself  as  to  the  elasticity  of  the  note  circulation, 
is  the  close  correspondence  between  the  loans  of  the  bank 
and  its  issues.  The  chart  shows  that  as  the  loans  increased 
the  issues  increased,  as  the  loans  diminished  the  issues 
diminished.  This  is  elasticity.  Carrying  the  analysis  a 
little  farther,  it  will  be  evident  that  the  loans  and  issues 
fluctuate  generally  in  a  systematic  and  not  in  an  irregular 
manner.  The  demand  for  banking  credits  was  greater  at 
certain  periods  of  the  year  than  it  was  at  others.  In  the 
summer  the  demand  was  usually  less  than  during  the  rest  of 
the  year.  This  was  due  to  the  fact  that  between  two  crops 
the  necessity  for  banking  accommodations  diminished.  As  a 
general  rule — a  rule  determined  by  the  need  of  credit  to 
grow  and  to  move  the  crop — the  circulation  increased  from 
October  to  April,  then  either  remained  at  the  level  attained 

1 8.  D.  82,  22d  Cong.,  2d  Sess.,  p.  3. 


426  THE  SECOND  BANK  OF  THE  UNITED  STATES 

or  rose  slightly  until  July ;  from  July  to  October  it  dimin- 
ished to  a  considerable  degree.  These  variations  amount  to 
several  millions  in  a  few  months.  That  there  are  exceptions 
to  this  general  rule  goes  without  saying.  Where  there  are 
exceptions,  however,  they  can  be  explained  either  on  the 
ground  of  something  unusual  in  the  transactions  of  the 
bank,  or  something  unusual  in  the  commercial  condition  of 
the  country.  Thus  the  rule  for  fluctuation  will  not  apply 
at  all  during  the  entire  period  in  which  Cheves  administered 
the  affairs  of  the  bank.  The  explanation  is  not  far  to  seek. 
Cheves  almost  put  an  end  to  that  part  of  the  bank's  business 
which  was  based  upon  the  southern  and  western  trade,  in 
other  words  upon  the  crop.  Necessarily,  the  fluctuations  in 
the  currency  could  not  be  determined  by  demands  having 
reference  to  the  crop.  That  the  periods  of  fluctuation  are 
changed  is  only  additional  evidence  of  the  elasticity  of  the 
issues.  Again  in  1831  the  issues  did  not  decrease  through 
the  summer  months.  The  reason  was  that  in  this  year  there 
was  a  general  expansion  of  such  potency  that  the  issues 
could  not  be  diminished.1  Similarly  in  1832—33  there  is  a 
contraction  where  regularly  there  should  be  an  expansion. 
This  is  explained  by  the  fact  that  the  bank  had  to  secure  a 
stock  of  specie  in  order  to  redeem  a  portion  of  the  public 
debt.  Again  in  1833—34  there  was  a  similar  contraction, 
because  the  bank  was  operating  to  create  distress. 

In  the  nature  of  the  case,  deposits  are  elastic.  The  line 
in  the  chart  resulting  from  combining  deposits  and  issues 
shows  a  wonderful  correspondence  with  the  line  for  "total 
accommodations."  The  circulation  of  the  bank,  using  the 
word  to  include  the  deposits,  was  certainly  elastic  in  a  high 
degree.2 

1 S.  D.  17,  23d  Cong.,  2d  Sess.,  p.  97. 

2  The  question  of  elasticity  possesses  importance  today  largely  because  the  very 
inelastic  currency  of  the  United  States  has  been  productive  of  considerable  injury 
to  the  business  interests  of  the  country.  It  is  admitted  by  most  that  the  evils  inci- 


ISSUES  OP  THE  BANK 


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ISSUES  AND  DEPOSITS 
(Computed  at  end  of  each  month) 


428  THE  SECOND  BANK  OP  THE  UNITED  STATES 

That,  in  considering  only  the  note  issues  of  the  bank,  all 
the  elements  of  the  circulation  have  not  been  touched  upon 
goes  without  saying.  It  is  necessary  to  add  to  these  the 
bank  drafts  in  circulation,  the  deposits,  and  even  bills  of 
exchange  in  so  far  as  these  were  transferred  by  indorsement. 
All  these  elements  were  of  importance,  but  in  the  case  of 
bills  of  exchange  and  bank  drafts  it  is  impossible  to  determine 
the  amounts,  and  therefore  they  cannot  be  considered.  Gal- 
latin,  indeed,  is  authority  for  the  statement  that  the  drafts 
in  1829  were  equal  to  a  million  dollars  in  the  circulation.1 
But  while  this  gives  information  which  is  of  value  for  1829, 
it  does  not  help  in  the  least  toward  determining  the  amount 
of  that  species  of  currency  for  other  years.  It  is  only 
certain  that  it  was  a  varying  sum,  that  in  the  early  years  of 
the  bank  it  amounted  to  very  little,  while  after  1829  it  con- 
tinually increased  and  was  of  considerable  importance.  For 
instance,  while  in  1829  the  amount  was  $24,384,000,  in  the 
fiscal  year  from  July  1,  1830,  to  June  30,  1831,  it  was  $33,- 
641,000,2  and  in  1832  $45,157,000." 

The  deposits,  which  constituted  by  all  odds  the  most 
important  of  these  elements  in  the  bank's  circulation,  were 
almost  or  quite  as  large  a  part  of  the  circulation  as  the  note 
issues.  But  the  really  striking  matter  in  regard  to  them,  to 
one  familiar  with  the  importance  of  deposits  today,  is  that 
they  were  so  insignificant.  It  would  be  difficult  now  to  find 
many  banks  whose  deposits  do  not  greatly  exceed  their  note 
issues,  while  from  1817  to  1836  the  one  great  bank  of  the 

dent  to  a  currency  largely  composed  of  a  fixed  amount  of  greenbacks  and  the 
inelastic  issues  of  the  national  banks  should  be  removed.  The  principal  question, 
however,  is  as  to  the  remedy  to  be  used.  There  is  certainly  ground  for  thinking 
that  a  system  of  great  banks  with  numerous  branches  would  be  by  all  odds  the 
most  successful  measure. 

1 "  The  total  annual  amount  of  those  drafts  is  about  twenty-four  millions  of 
dollars,  and  they  are  on  an  average  paid  within  fifteen  days  after  being  issued.  The 
amount  always  in  circulation  may,  therefore,  be  estimated  at  one  million."— ADAMS, 
Gallatin's  Writings,  Vol.  Ill,  p.  296. 

2  Ex.  Doc.  147, 22d  Cong.,  1st  Sess.,  pp.  4-30.          3 s.  D.  17, 23d  Cong.,  2d  Sess.,  p.  180. 


ISSUES  OP  THE  BANK  429 

country  held  deposits  only  about  equal  to  its  note  cir- 
culation, and  this,  too,  under  the  favorable  circumstance 
that  the  larger  part  of  them  consisted  of  government 
deposits.1 

In  conclusion  it  will  not  be  amiss  to  point  out  the  one 
great  defect  in  the  paper  currency  of  the  second  Bank  of  the 
United  States,  and  to  suggest  remedies.  The  prime  defect 
in  the  currency  was  its  want  of  strict  convertibility.  This 
led  to  depreciation  and  to  redundant  issues,  and  interfered 
with  the  elasticity  of  the  paper.  The  remedy  for  this  state 
of  affairs  was  certainly  not  to  destroy  the  bank.  In  the 
stage  of  banking  then  existing  that  was  an  excess  of  folly. 
A  re-charter  should  have  been  granted  and  the  bank  should 
have  been  compelled  to  receive  all  its  notes  at  all  its  offices. 
In  this  respect  the  bill  to  re-charter  insured  great  improve- 
ment,2 for  it  compelled  the  bank  to  take  all  its  notes  in  pay- 
ment of  debts  due  to  it  from  state  banks.  This  would  have 
almost  completely  met  the  difficulty,  as  is  proved  by  the 
result  of  the  bank's  adoption  of  this  plan  in  New  York  and 
Baltimore  in  1833,  whereupon  depreciation  in  those  cities 
ceased  to  exist  for  the  first  time  in  fifteen  years.  In  the 
next  place,  the  state  banks  as  well  as  the  national  bank 
should  have  been  prohibited  from  issuing  notes  of  a  smaller 
denomination  than  $5.  This  would  certainly  have  brought 

•/  O 

into  circulation  a  larger  amount  of  specie,  which  would  have 
helped  to  check  the  tendency  to  undue  fluctuations  so  com- 
mon in  the  currency  of  that  time.  These  measures  would 
undoubtedly  have  given  the  country  an  excellent  paper  cur- 
rency, completely  convertible  and  sufficiently  elastic.  Had 
these  things  been  done,  the  nation  would  in  all  probability 
have  escaped  the  worst  disasters  of  wild-cat  banking,  the 
mistake  of  the  greenback  issues,  and  perhaps  the  free-silver 
agitation. 

1  For  tables  of  deposits  see  Appendix  V  and  Appendix  XIII. 

2  See  Appendix  IV,  sec.  4  of  the  bill. 


CHAPTER  XVIII 
THE  BANK,  THE  STATE  BANKS,  AND  THE  CURRENCY 

THE  relations  between  the  bank  and  the  state  banks 
necessarily  fall  under  consideration  in  any  history  of  either 
the  bank  or  the  state  banks.  This  is  true  because  the  two 
systems  were  intimately  associated,  not  indeed  by  law,  but 
by  ties  more  strict,  more  far-reaching,  and  less  easily  evaded. 
In  brief,  what  Bagehot  has  said  of  the  Bank  of  England  will 
apply  to  the  Bank  of  the  United  States,  though  not  to  the 
same  extent.  It  was  the  center  of  a  "  single  banking  reserve 
system."  In  the  case  of  the  bank  this  was  not  the  result  of 
depositing  state-bank  reserves  in  its  vaults,  but  of  the  fact 
that  the  state  banks  made  no  particular  efforts  to  keep  an 
adequate  reserve.  Instead  of  doin'g  so,  they  trusted  to  the 
Bank  of  the  United  States  to  protect  them  in  case  of  an 
unusual  call  for  the  precious  metals.  Consequently  all  large 
demands  for  specie  finally  fell  upon  it;  all  hope  of  payments 
in  time  of  monetary  stringency  rested  ultimately  upon  it. 
In  other  words,  the  Bank  of  the  United  States  alone  was 
capable  of  preserving  the  soundness  of  the  currency;  it 
alone  was  responsible  for  the  continuance  of  specie  payments. 

The  most  potent  argument  for  the  establishment  of  the 
bank  was  found  in  the  confident  expectation  that  it  would 
compel  the  resumption  of  specie  payments,  hold  the  state 
banks  in  leash,  and  supply  "  a  sound  and  uniform  currency." 
And  yet,  though  everyone  in  the  country  ascribed  such 
powers  to  the  bank,  few  had  any  conception  of  the  precise 
method  by  which  it  attained  these  desirable  ends,  and  fewer 
still  had  the  faintest  notion  of  the  actual  relations  between  the 
bank  and  the  state  banks,  while  probably  Biddle  alone  had 

430 


THE  BANK,  THE  STATE  BANKS,  THE  CURRENCY  431 

grasped  the  idea  that  the  bank  held  the  final  specie  reserve 
of  the  country.  In  an  interesting  letter  to  Gallatin  in  July, 
1830,  his  appreciation  of  this  fact  is  apparent.  The  exist- 
ence of  a  specie  currency,  he  asserts,  depends  wholly  upon 
the  Bank  of  the  United  States,  and  sixty  days  after  it  ceases 
to  exist  specie  payments  will  likewise  cease  to  exist.  The 
state  banks  almost  always  have  their  resources  "  strained  to 
the  utmost,"  and  under  these  circumstances  a  slight  pressure 
would  bring  on  a  panic,  if  the  Bank  of  the  United  States 
did  not  stand  ready  to  stave  it  off. 

Such  is  the  inevitable  tendency  of  the  Banks.  It  becomes  there- 
fore of  great  importance  to  have  amongst  them  something  to  which 
they  can  be  anchored  in  these  squalls.  When  such  a  demand  arises 
as  the  local  Bankers  and  private  Capitalists  cannot  supply  the  Bank 
of  the  United  States  by  means  of  its  accumulations  of  Bills  and  its 
extended  credits  in  Europe  is  enabled  to  weaken  the  pressure,  to 
supply  the  demands  at  rates  which  ward  off  from  the  State  Banks 
too  great  a  demand  for  coin — to  allow  them  time  to  diminish  their 
issues  without  ruin  to  their  customers,  and  by  the  gradual  reduction 
of  their  business  cure  the  existing  disorder. 

At  such  moments  the  bank  is  the  only  safeguard.1  In  other 
words,  the  local  banks  traded  without  any  feeling  of  respon- 
sibility on  their  part,  anxious  only  to  make  the  largest  pos- 
sible profits  and  leaving  to  the  Bank  of  the  United  States 
the  problem  of  keeping  up  specie  payments. 

That  Biddle's  opinions  were  sound,  that  the  bank  was  in 
the  circumstances  the  only  guarantor  of  specie  payments, 
that  it  was  expected  to  take  care  of  the  state  banks  and  the 
country,  is  established  by  a  number  of  circumstances.  Its 
specie  reserve  was  always  much  greater  in  proportion  to  its 
circulation  than  that  of  any  other  bank.  The  proportion 
was  large,  being  fixed  deliberately  at  one-third  of  its  circula- 
tion,2 though  in  fact  it  was  far  in  excess  of  this  for  much  of 

1  Biddle  to  Gallatin,  July  29,  1830,  P.  L.  B.,  Vol.  Ill,  pp.  308,  309.    See  also  the 
Triennial  Report  of  1831,  NILES,  Vol.  XLI,  p.  115. 

2  Webster,  Feb.  26, 1834,  C.  D.,  Vol.  X,  Part  I,  p.  737. 


432  THE  SECOND  BANK  OP  THE  UNITED  STATES 

the  time.  The  state  banks  held  no  such  proportion.  Thus 
in  1833,  while  the  Bank  of  the  United  States  had  a  circula- 
tion of  $17,000,000  and  held  specie  to  the  extent  of  $9,000,- 
000,  the  state  banks  had  a  circulation  of  $68,000,000  and 
only  $10,000,000  or  $11,000,000  in  specie.1  The  propor- 
tion of  loans  to  its  capital  which  it  felt  justified  in  making 
shows  just  as  clearly  that  its  responsibilities  were  recognized, 
even  if  only  dimly.  The  largest  sum  it  ever  had  on  loan  was 
$70,000,000,  being  twice  the  amount  of  its  capital  Even 
the  directors  thought  this  proportion  excessive,  unwise,  and 
unsafe,  while  the  man  on  the  street  raved  against  the  indis- 
cretion of  the  bank,  sober  men  suggested  that  a  repetition  of 
the  offense  should  be  legally  prevented,2  and  a  famous  Phila- 
delphia banker,  friendly  to  the  bank,  in  discussing  the  acts 
of  the  directors  declared:  "They  have  acted  like  madmen, 
and  deserve  to  have  conservators  appointed  over  them."3 
Yet  at  the  very  same  moment  the  New  York  banks  had 
loaned  two  and  a  half  times  the  amount  of  their  capital, 
and  no  one  censured  them  for  doing  so.4 

This  simply  meant  that  everyone  looked  upon  the  bank, 
and  justly,  as  the  holder  of  the  ultimate  banking  reserve, 
and  that  every  state  bank  acted  on  that  assumption.  Per- 
haps the  most  surprising  illustration  of  the  extent  of  this 
belief  was  furnished  by  Girard's  Bank.  Girard  was  univer- 
sally esteemed  as  a  wise  and  conservative  banker,  and  yet  he 
[apparently  allowed  his  bank  to  run  along  without  the  slight- 
est preparation  to  pay  its  obligations.  In  1828  Biddle 
records  his  sensation  of  overwhelming  astonishment  at  hav- 
ing Girard's  cashier  enter  the  Bank  of  the  United  States 
and  coolly  deliver  the  astounding  information  that  his  bank 
had  not  enough  specie  in  its  vaults  to  meet  a  sight  draft  for 


i  Verplanck,  H.  R.  121,  22d  Cong.,  2d  Sess.,  p.  5. 

SSelden,  of  New  York,  in  the  House,  Feb.  3, 1834,  C.  D.,  Vol.  X,  Part  II,  p.  2589. 

sCamberleng,  quoting  letter  of  Feb.  16, 1832,  ibid.,  pp.  2380,  2381. 

*  Selden,  loc.  cit. 


THE  BANK,  THE  STATE  BANKS,  THE  CURRENCY  433 

$57,000.  Biddle  at  once  did  what  alone  remained  to  do:  he 
loaned  the  Girard  Bank  $50,000  in  specie.1  When  in  1831 
Girard  died,  Biddle  made  the  still  more  astounding  discovery 
that  his  bank  held  only  a  few  thousand  dollars  in  coin  to 
meet  immediate  specie  liabilities  for  large  sums.  The  Bank 
of  the  United  States  again  came  forward,  this  time  with  a 
loan  of  $100,000,  to  protect  the  Girard  Bank.2 

The  situation  was  made  much  more  perilous  because  of 
the  complete  lack  of  unity  between  the  bank  and  the  state 
banks,  and  because  the  actual  elements  in  the  situation  were 
not  plainly  admitted.  The  lack  of  unity,  and  the  general  fail- 
ure to  recognize  the  actual  status,  made  any  common  policy 
or  any  concerted  action  on  the  part  of  the  bank  and  the 
state  banks  impossible.  This  was  probably  the  most  serious 
defect  in  the  banking  system  of  that  day,  yet  it  was  unavoid- 
able. Even  had  the  Bank  of  the  United  States  made  over- 
tures to  the  state  banks  for  united  action,  it  would  have  been 
repelled,  for  such  a  proposal  would  immediately  have  aroused 
the  suspicion  that  it  was  attempting  to  secure  an  advantage. 
Therefore  it  had  to  do  as  well  as  it  could  without  such  agree- 
ment. So  long  as  all  was  fair  and  debts  were  promptly 
paid,  the  state  banks  expanded  to  the  last  dollar  allowed  by 
the  law  and  by  the  Bank  of  the  United  States;  but  as  soon 
as  a  demand  for  specie  arose  or  commercial  panic  threatened, 
each  hastened  to  get  under  cover  and  to  throw  the  burden 
on  the  others.  "The action  of  the  Banks  among  themselves," 
said  Gouge,  "  has  been  compared  to  that  of  so  many  drunken 
men  passing  along  the  street  together,  occasionally  support- 
ing one  another,  and  occasionally  knocking  one  another 
down."  3  "If  the  Banks  here,"  wrote  Lenox  in  1825,  "were 
faithful  to  each  other  there  would  not  be  any  difficulty,  but 
we  have  reason  to  believe  they  are  not."  *  It  would  have 

i  Memorandum  of  Biddle  in  B.  P.         2  Biddle  to  Cadwalader,  Dec.  29, 1831,  ibid. 
3  Cobbett's  edition,  p.  135.  «  Lenox  to  Biddle,  Dec.  8, 1825,  B.  P. 


434  THE  SECOND  BANK  OP  THE  UNITED  STATES 

been  strange,  indeed,  if  there  had  been  reason  to  believe 
anything  else.  In  December,  1827,  he  again  wrote  that,  as 
a  consequence  of  unusual  demands  for  specie,  the  New  York 
city  banks  were  exercising  "great  caution  ....  and  a 
trial  of  skill  to  keep  from  being  debtor  Banks,  and  every 
engine  used  at  home  and  abroad  to  get  demands  on  the 
Branch,"  which  of  course  the  branch  was  doing  its  best 
to  evade.1  In  February,  1828,  Biddle  noted  that  the  Phila- 
delphia banks  in  the  presence  of  a  distressing  stringency 
were  reducing  and  declining  to  bear  their  share  of  the  bur- 
den of  relief.2 

The  inevitable  result  at  such  times  was  still  further  to 
diminish  confidence,  increase  the  force  of  commercial  dis- 
tress, and  throw  the  burden  finally  on  the  Bank  of  the 
United  States,  which  had  no  means  of  evading  it.  Thus  in 
1825  the  bank  had  kept  off  the  panic  so  disastrous  in  that 
year  to  England,  and  in  1828  everyone  looked  to  it  for 
similar  services,  and  complained  bitterly  because  it  did  not 
discount  freely  and  relieve  the  pressure.  Biddle  in  answer 
published  a  long  article  explaining  that  it  was  the  duty  of 
the  bank  to  take  care  of  itself,  and  that  the  state  banks  were 
at  fault  in  overtrading.3  That  he  felt  compelled  to  defend 
the  bank  is  significant  of  the  position  ascribed  to  it  in  popu- 
lar opinion. 

Granted  that  the  bank  might  justly  be  looked  to  for 
assistance  in  time  of  pressure,  it  follows,  as  a  matter  of 
course,  that  it  would  be  perfectly  justified  in  attempting  to 
restrain  the  state  banks  in  its  own  interests,  as  well  as  in  the 
interests  of  the  country.  For  its  own  sake  it  was  still 
further  bound  to  do  so,  because  in  case  of  suspension  it  must 
pay  interest  at  the  rate  of  12  per  cent,  per  annum  on  all  its 

1  Same  to  same,  Dec.  20, 1827,  ibid. 

2  Biddle  to  Lenox,  Feb.  12,  1828,  P.  L.  B.,  Vol.  II,  p.  344. 

3  Article  of  April  10, 1828,  in  the  National  Gazette.    For  extracts  see  GOCGE  (Cob- 
bett's  edition),  pp.  150-55. 


THE  BANK,  THE  STATE  BANKS,  THE  CURRENCY  435 

notes  and  deposits,  not  immediately  redeemed  in  specie  on 
demand.1 

What  means  of  control  over  the  state  banks  did  it  possess  ? 
How  could  it  restrain  their  discounts  ?  How  could  it  put  an 
end  to  the  depreciation  of  their  paper  ?  The  process  was  sim- 
plicity itself :  The  bank  merely  presented  the  notes  of  the 
state  banks  for  payment  when  they  fell  into  its  hands.  As 
Biddle  succinctly  and  clearly  expressed  it:  "A  branch  bank 
is  near  a  local  bank  —  the  branch  notes  are  more  valuable 
than  the  local  notes  —  the  local  notes  are  exchanged  for 
branch  notes  at  the  branch  bank,  which  thus  becomes  the 
creditor  of  the  local  bank,  and  makes  it  pay  its  debts,  and  thus 

reduce  its  circulation Almost  all  State  banks  stand  in 

this  relation  to  the  bank  and  its  branches."2  Or,  as  Gal- 
latin  put  it  even  more  briefly,  the  process  consisted  "  in 
receiving  the  notes  of  all  those  which  are  solvent  and  requir- 
ing payment  from  time  to  time,  without  suffering  the  bal- 
ance due  by  any  to  become  too  large."  The  importance  of 
this  measure  Gallatin  emphasized  by  adding:  "We  think 
that  we  may  say  that  on  this  operation,  which  requires  par- 
ticular attention  and  vigilance  and  must  be  carried  on  with 
great  firmness  and  due  forbearance,  depends  almost  exclu- 
sively the  stability  of  the  currency  of  the  country."  '  Accord- 
ing to  these  explanations  the  bank  became  the  creditor  of 
the  state  banks  and  then  forced  them  to  pay.  Two  ques- 
tions immediately  arise:  Was  the  bank  actually  always  a 
creditor  bank?  and,  How  could  it  become  so  and  remain  so? 

The  bank  undoubtedly  was  the  creditor  of  the  state  banks 
at  almost  every  moment  of  its  existence,  as  is  clearly  proved 
by  its  returns,  which  show  that  it  habitually  held  large  bal- 
ances against  them.4  These  enormous  balances  resulted  be- 
cause it  received  more  state-bank  paper  in  payment  of  its 

i  Biddle  pointed  this  out  to  Gallatin  July  23, 1830.— P.  L.  B.,  Vol.  Ill,  p.  299. 

2ff.  R.  460,  22d  Cong.,  1st  Sess.,  p.  363. 

3  ADAMS,  GallatMs  Writings,  Vol.  Ill,  p.  336.  *See  Appendix  V. 


436  THE  SECOND  BANK  OF  THE  UNITED  STATES 

debts  than  the  state  banks  received  of  its  paper,  so  that  after 
an  exchange  of  notes  the  state  banks  would  still  remain  in- 
debted and  be  compelled  to  discharge  the  balance  in  specie. 
What  amount  of  state-bank  notes  the  bank  took  in  it  is 
impossible  to  say,  but  in  1832  it  received  $20,047,815.30  of 
such  notes  in  places  where  it  had  no  office.1  Whatever  the 
sum,  Niles  calculated  in  1829  that  as  a  consequence  of  its 
branch  system  the  bank  was  able  to  present  to  the  state 
banks  for  redemption  their  notes  to  five  times  the  amount 
that  they  could  present  of  the  bank's  in  return.2  Whether 
this  calculation  was  or  was  not  correct,  it  is  certain  that 
the  bank  received  more  of  the  paper  of  state  banks  than 
they  received  of  its  paper,  and  was  consequently  almost 
always  the  creditor.  It  only  remains,  therefore,  to  explain 
how  it  became  so,  and  how  it  remained  so. 

The  fundamental  means  of  obtaining  this  result  was  the 
exercise  of  proper  restraint  in  its  own  dealings.  It  follows 
as  a  matter  of  course  that  if  the  bank  discounted  less  and 
issued  fewer  notes  than  the  state  banks,  it  would  probably 
receive  more  of  their  notes  in  payment  of  debts  due  to  it 
than  the  state  banks  would  receive  of  its  notes.  This  result 
was  made  certain-  by  its  collecting  all  the  revenues  of  the 
government,  much  of  which  came  to  it  in  state-bank  paper. 
Thus  it  secured  an  immediate  claim  upon  them  for  specie, 
and  a  means  of  keeping  down  their  discounts.3  These  were 
the  principal  sources  of  the  bank's  power,  and  either  of  them 
alone  would  have  sufficed. 

There  were  other  means  of  exercising  control  besides  that 
of  presenting  the  state-bank  notes  for  specie.  In  all  pay- 
ments to  the  government  the  state  banks  had  to  satisfy  the 
Bank  of  the  United  States  that  their  notes  were  equivalent 
to  specie,  before  the  government  would  receive  them,4  and  if 

1 S.  D.  82,  22d  Cong.,  2d  Sess.,  p.  S.  2  NILES,  Vol.  XXXVI,  p.  210. 

3  Isaac  Bronson  to  J.  A.  Hamilton,  April  4, 1833,  Reminiscences,  p.  254. 

*  Rules  and  Regulations  for  the  Government  of  the  Offices,  Art.  24.  See  Appendix  X. 


THE  BANK,  THE  STATE  BANKS,  THE  CURRENCY  437 

the  government  refused  them,  a  source  of  extensive  circula- 
tion was  immediately  closed.1  Further,  the  bank  would  not 
only  stop  the  receipt  of  notes  by  the  government,  but  it 
would  not  itself  receive  them,  and  when  neither  the  govern- 
ment nor  the  bank  took  the  notes  of  a  state  bank,  they  would 
not  be  received  by  individuals.  Hence  the  Bank  of  the 
United  States  could  keep  the  state  banks  on  a  specie-paying 
basis  and  restrict  their  business,  or  destroy  the  credit  of  their 
notes.2 

The  bank,  moreover,  was  able  to  keep  its  immediate 
demands  for  specie  from  the  state  banks  in  excess  of  those  of 
the  state  banks  upon  it,  by  refusing  the  receipt  of  its  branch 
paper  in  settlement  of  balances.3  The  notes  of  the  state 
banks  circulated  for  the  most  part  in  the  neighborhood  of 
their  issues,  while  branch  notes  circulated  everywhere  in 
the  United  States.  It  was  consequently  easy  for  the  bank 
to  collect  and  present  for  redemption  the  paper  of  the  state 
banks;  it  was  sometimes  impossible  for  a  state  bank  to 
present  the  notes  of  the  branch  in  its  vicinage,  and  seldom 
possible  to  do  this  for  a  large  amount  even  when  it  had  a 
considerable  quantity  of  branch  notes  on  hand,  for  there 
would  probably  be  but  few  of  the  notes  of  the  neighboring 
office  among  them.  Moreover,  to  make  certain  that  the 
branches  should  keep  the  state  banks  in  debt,  it  was  cus- 
tomary to  receive  from  individuals  the  notes  of  state  banks 

1  Extensive  circulation  in  the  case  of  most  southern  and  western  banks  was  pos- 
sible only  because  the  government  took  their  notes  in  payment  of  tariff  dues,  post- 
office  receipts,  land  payments,  internal  revenue,  etc. 

2 The  cashier  at  Louisville  in  1832  writes  that  "all  other  notes"  are  excluded 
"  from  circulation  "  because  the  branch  refuses  to  receive  the  notes  "  of  any  bank  ex- 
cept the  Bank  of  the  United  States  and  its  branches." — H.  R.  121,  22d  Cong.,  2d  Sess., 
p.  146. 

The  refusal  to  receive  their  notes  was,  however,  sometimes  desired  by  state 
banks,  as  it  left  them  absolutely  free  from  all  control.  "Among  the  great  variety  of 
measures  which  we  have  been  obliged  to  resort  to  to  keep  the  State  Banks  up  to  a 
proper  standard,  it  has  generally  been  found  that  not  to  take  their  Notes,  is  what 
is  often  most  desired,  since  in  this  way  they  escape  control."— Biddle  to  Gallatin, 
July  23, 1830,  P.  L.  B.,  Vol.  Ill,  p.  297. 

3  This  was  not  infrequently  done.— 8.  D.  24,  23d  Cong.,  1st  Sess.,  pp.  2-4,  9-12. 


438  THE  SECOND  BANK  OF  THE  UNITED  STATES 

on  deposit  and  pay  the  deposit  in  branch  notes.1  In  case  the 
branch  notes  were  not  at  once  drawn  out,  no  immediate 
demand  was  created  upon  the  office,  while,  even  if  they  were 
at  once  withdrawn,  no  equivalent  demand  would  be  created, 
because  in  the  natural  course  of  trade  most  of  these  notes 
would  be  carried  to  Philadelphia  for  payment.  Meanwhile 
the  state-bank  notes  became  an  immediate  demand  for  specie 
upon  the  state  banks.  At  times  the  bank  even  furnished  its 
own  notes  to  a  branch  with  instructions  to  issue  them  for 
state-bank  notes,  when  the  same  result  would  be  attained. a 

The  bank's  control  was  rendered  more  efficacious,  and 
its  action  was  immediately  and  keenly  felt,  because  a  call 
for  specie  did  not  mean  simply  the  retirement  of  a  dollar 
of  paper  for  the  payment  of  a  dollar  in  coin.  To  secure 
the  specie,  the  state  banks  were  forced  to  call  upon  their 
debtors,  and  these,  whenever  possible,  paid  in  state-bank 
notes  instead  of  in  coin.  Consequently,  Taney  calculated 
that  to  collect  $1,000,000  in  specie  the  circulation  would 
have  to  be  diminished  four  or  five  millions.3  A  balance 
against  the  state  bank  was  therefore  an  engine  of  tre- 
mendous potency  in  compelling  these  banks  to  restrict 
their  dealings.  So  potent,  indeed,  that  one  is  safe  in  accept- 
ing Biddle's  assertion  that  there  were  "very  few  banks 
which  might  not  have  been  destroyed  by  an  exertion  of  the 
power  of  the  bank."  * 

On  the  other  hand,  the  Bank  of  the  United  States  was 
itself  constantly  restrained  by  the  state  banks.  This  was 
the  inevitable  outcome,  for  otherwise  it  would  fall  into  debt 

1  The  president  of  the  Fayetteville  branch  speaks  of  the  impossibility  of  con- 
tinning  "  to  receive  Local  Bank  Notes  in  deposit,  repayable  in  notes  of  this  office." — 
To  Biddle,  July  29, 1826,  B,  P.    See  Biddle,  H.  R.  460,  22d  Cong.,  1st  Sess.,  p.  363. 

2  Biddle  to  Gumming,  Feb.  20, 1830,  P.  L.  B.,  Vol.  Ill,  p.  183.    In  both  cases  noted 
above  the  bank  would  create  an  immediate  demand  upon  the  state  bank  and  a 
remote  demand  upon  itself,  usually  payable  at  Philadelphia. 

3  Ex.  Doc.  2,  23d  Cong.,  1st  Sess.,  p.  9. 

<&  D.  50,  22d  Cong.,  1st  Sess.,  p.  25.  Report  of  March  29,  1830.  See  Niles's 
remarks  on  the  position  of  the  bank  in  1829,  Vol.  XXXVI,  p.  209. 


THE  BANK,  THE  STATE  BANKS,  THE  CURRENCY  439 

to  them  and  lose  its  commanding  position,  with  the  added 
risk  of  creating  a  pressure  so  intense  as  to  lead  to  its  own 
bankruptcy.  Control,  therefore,  was  reciprocal.  The  advan- 
tage of  the  Bank  of  the  United  States  lay  in  knowing  what 
it  wanted,  in  having  the  means  to  attain  its  wishes  without 
unduly  contracting  its  business,  in  possessing  branches, 
and  in  having  a  unified  policy. 

It  is  evident  that  the  bank  could  easily  secure  balances 
against  the  state  banks,  that  it  usually  held  such  balances, 
and  that  it  had  various  other  means  of  exerting  pressure 
upon  the  state  banks.  It  can  be  as  little  doubted  that  it  did 
exert  pressure  upon  them.  Biddle  asserted,  the  state  banks 
complained,  that  it  did  so.  The  pressure  exerted  and  the 
control  attained,  however,  varied  at  different  periods  during 
its  existence. 

During  the  years  1817-18  the  bank  failed  ignobly  to 
perform  its  duty  in  this  respect.  True,  it  secured  a  resump- 
tion of  specie  payments  by  an  agreement  with  the  state 
banks,  and  it  established  a  rule  by  which  they  were  to 
settle  for  their  notes  "at  least  once  a  week."1  But  having 
done  these  things  it  seemed  to  lose  all  control,  not  only  of 
the  state  banks,  bat  of  itself  as  well.2  The  failure  to  hold  the 
state  banks  in  check  was  one  of  the  items  of  censure  in  the 
report  of  the  congressional  committee  of  1819,3  and  it  was 
responsible  for  many  of  the  embarrassments  in  which  the 
bank  was  then  involved. 

During  the  administration  of  Cheves  the  bank  issued  a 
very  limited  quantity  of  its  own  notes,  using  instead  the 
notes  of  the  state  banks  when  it  made  discounts.  Cheves 
thus  surrendered  the  "  most  efficient  means  "  of  supplanting 

1  Rules  and  Regulations  for  the  Government  of  the  Offices,  Art.  25.    See  Appen- 
dix X. 

2  The  balances  dne  from  the  state  banks  at  no  other  period  averaged  so  high. 
See  Appendix  V. 

3f.,Vol.  Ill,  p.307. 


440  THE  SECOND  BANK  OF  THE  UNITED  STATES 

the  issues  of  the  state  banks  and  of  furnishing  a  sound  and 
uniform  currency,1  and  gave  state-bank  notes  a  wider  cur- 
rency by  issuing  them  instead  of  demanding  their  immediate 
redemption.  On  the  other  hand,  the  failure  to  issue  its  own 
notes  increased  the  corporation's  power  over  the  state  banks 
to  an  extraordinary  degree,  since  it  received  their  notes  in 
large  quantities,  while  its  own  notes  could  not  be  secured 
by  them  as  an  offset  to  the  demand  upon  them.  As  a  con- 
sequence the  insistence  upon  the  payment  of  balances 
remaining  in  the  possession  of  the  Bank  of  the  United 
States,  even  after  its  issuing  of  large  quantities  of  state-bank 
notes,  was  almost  intolerable  to  the  state  banks.  Out  of  this 
situation  arose  the  disputes  with  the  Savannah  banks.  In 
1821  they  were  "  severely  crippled  by  the  measures  of  the 
Bank  of  the  United  States "  which  threatened  them  with 
"  absolute  ruin." 2  All  this,  too,  when  the  Bank  of  the  United 
States  was  permitting  them  to  hold  a  permanent  credit  in  its 
funds  of  $100,000  and  demanding  payment  only  of  the 
excess  of  that  sum  once  a  week. 

When  Biddle  became  president  he  at  once  adopted  a 
plan  to  repress  the  issues  of  the  state  banks  and  put  an  end 
to  the  depreciation  of  their  notes,  with  the  object  of  expand- 
ing the  business  of  the  Bank  of  the  United  States  while  at 
the  same  time  giving  a  sound  and  uniform  currency  to  the 
country.  To  adopt  a  rule  to  collect  balances  was  nothing 
new,  to  keep  it  was.  Biddle  put  the  rule  into  effect  once 
more;  and  for  the  most  part  he  kept  it.  The  results  were 
notable.  In  1824  the  Virginia  banks  were  forced  to  reduce.3 

i  la  this  way,  said  Biddle,  the  bank  "  surrendered  its  most  efficient  means  of 
control  over  the  currency."— Triennial  Report  of  1828,  NILES,  Vol.  XXXV,  p.  74;  Tri- 
ennial Report  of  1831,  ibid..  Vol.  XLI,  p.  111.  Gouge  asserts  that  Cheves's  policy 
helped  to  delay  the  renewal  of  specie  payments  in  South  Carolina  until  1823.—  GOUGE 
(Cobbett's  edition),  p.  104. 

2 The  president  of  the  Planters'  Bank  to  Crawford,  July  21, 1821,  F.,  Vol.  IV, 
pp.  1068, 1069. 

3  C.  J.  Nicholas  to  Biddle,  Richmond,  Aug.  10, 1824,  B.  P. 


THE  BANK,  THE  STATE  BANKS,  THE  CURRENCY  441 

In  1825  the  constant  settlement  of  balances  was  general1 
In  1826  the  bank  undertook  to  correct  the  currency  of  Ala- 
bama, avowing  that  purpose  when  establishing  a  branch  at 
Mobile2  and  instructing  it  to  adopt  "frequent  and  regular 
settlements  with  the  State  Bank  of  Alabama,"  and  to  insist 
upon  the  immediate  payment  of  the  balances  in  specie  or 
paper  equivalent  to  specie,3  with  the  result  that  the  state 
bank  was  compelled  to  yield  and  Alabama  notes  ceased  to  be 
depreciated.4  In  1825  the  state  banks  of  North  Carolina, 
old  and  hardened  offenders,  which  had  refused  specie  pay- 
ments at  pleasure  since  1822,5  were  taken  in  hand,  but  after 
ten  months'  struggle  the  attempt  was  given  up  because  it  was 
impossible  to  continue  it "  without  a  further  supply"  of  branch 
notes.8  It  was  only  in  1827  that  this  deficiency  was  made 
good  by  the  invention  of  branch  drafts,  which  at  last  gave 
the  bank  the  means  of  securing  control  by  the  process  of 
exchanging  branch  notes  for  state-bank  notes.  As  a  conse- 
quence the  North  Carolina  state  banks  yielded  in  1828, 
making  an  agreement  with  the  Bank  of  the  United  States 
to  pay  specie  and  settle  their  balances  regularly.7  This 
marks  the  moment  when  through  the  use  of  branch  drafts 

1  See  pp.  97,  98. 

2  "  But  if  any  bank  should  so  mismanage  its  affairs  as  to  be  unable  to  meet  its 
engagements,  the  continued  issue  of  its  notes  would  be  injurious  to  the  community, 
....  In  such  an  event,  the  directors  of  the  Bank  of  the  United  States  would  deem 
themselves  faithless  to  their  great  duty  to  the  country,  the  preservation  of  a  sound 
currency,  if  they  did  not  control  an  institution  thus  insolvent  and  mischievous.   And 
this  duty  they  would  endeavor  to  perform  with  great  gentleness  and  great  forbear- 
ance, but  with  great  decision." —  Biddle  to  Governor  Murphy  of  Alabama,  Oct.  6, 
1826,  NiLEa,  Vol.  XXXII,  p.  125. 

»  Resolution  of  the  Bank  of  the  United  States,  July  24, 1829,  B.  P. 

*  Biddle  to  Joseph  Hemphill,  Feb.  8,  1830,  P.  L.  B.,  Vol.  in,  p.  174,  declares  that 
the  bank  has  corrected  the  evils  of  the  issues  of  the  state  bank,  and  that  its  notes 
are  now  at  par. 

5  NILES,  Vol.  XXIII,  p.  309,  for  beginning  of  failure.    North  Carolina  notes  were 
all  depreciated  in  1828.—  Ibid.,  Vol.  XXXIII,  p.  331,  and  Vol.  XXXIV,  pp.  153, 154. 

6  John  Huske,  president  of  the  Fayetteville  branch,  to  Biddle,  July  29, 1826,  B.  P. 

1  Biddle  to  John  Huske,  April  17, 1828,  says  the  plans  are  being  worked  out. — 
P.  L.  B.,  Vol.  II,  p.  374.  A  little  later  Cowperthwaite  was  sent  to  make  the  arrange- 
ment with  the  North  Carolina  banks,  and  did  so  to  the  effect  stated  in  the  text. 


442  THE  SECOND  BANK  OF  THE  UNITED  STATES 

Biddle  at  last  brought  to  a  successful  conclusion  his  plan  of 
keeping  state  banks  in  debt,  compelling  payment  of  bal- 
ances, reducing  their  business,  diminishing  their  issues,  and 
making  their  notes  as  good  as  specie. 

Biddle  himself  claimed  in  this  very  year  that  the  plan  had 
been  everywhere  perfectly  successful,1  and  his  assertion  was 
corroborated  by  others.  Thus  in  1830  McDuffie  expressed 
the  belief  that  North  Carolina  notes  were  the  only  ones 
at  a  discount,  and  these  were  depreciated  only  1  or  2  per 
cent.,2  while  a  year  earlier  they  had  been  at  5  to  8  and  12 
to  14  per  cent.3  Even  Gouge  admits  that  the  Bank  of  the 
United  States  had  succeeded  in  North  Carolina.*  In  Mis- 
souri it  was  asserted  that  the  depreciated  currencies  of  the 
state  had  been  completely  driven  out  of  existence  by  the 
establishment  of  the  branch  at  St.  Louis  in  1829,5  while 
Congressman  Hardin  declared  that  the  bank  had  done  this 
for  the  entire  West.6  The  truth  of  the  assertion  as  to  Mis- 
souri is  not  open  to  question,  for  Benton  urged  it  as  a  subject 
of  complaint.7  In  the  Southern  Review  in  1831  President 
Cooper,  though  unfriendly  to  the  bank,  makes  the  same 
admissions  relative  to  the  southern  states,  asserting  that  the 
banks  of  the  South  had  "been  rigidly  kept  to  cash  payments 
by  the  Bank  of  the  United  States,"  and  he  saw  "nothing 
unfair  in  this,  although  the  cash  of  the  district"  was  "almost 
monopolized  by  the  branches.  We  should  be  wanting  in 

i "  By  a  gradual  and  judicious  execution  of  this  plan  the  effect  followed,  that 
without  private  or  general  suffering  —  without  causing  the  failure  of  any  bank,  or  of 
any  individual ;  and  without  inconvenience  to  the  bank  of  the  United  States,  the 
banking  operations  of  the  country  have  been  brought  under  an  efficient  control ;  and 
a  large  amount  of  the  notes  of  the  bank  of  the  United  States  have  been  gradually 
substituted  for  the  depreciated  or  doubtful  currency,  which  was  so  injurious  to- the 
southern  and  western  states."— Triennial  Report  of  1828,  NILES,  Vol.  XXXV,  p.  74. 

2  H.  J?.,  358, 21st  Cong.,  1st  Sess.,  p.  18,  April  13, 1830.        3  NILES,  Vol.  XXXIV,  p.  154. 

*  GOUGE  (Cobbett's  edition),  p.  162.  &  C.  D.,  Vol.  X,  Part  II,  p.  2782. 

6  "  The  Bank  of  the  United  States  has  cleared  the  whole  country  of  that  kind  of 
paper,  and  substituted,  in  its  stead,  its  own  paper,  which  is  preferable  to  gold  and 
silver  on  account  of  its  portable  quality." — Ibid.,  Part  III,  p.  3406,  April  3, 1834. 

Ubid.,  Vol.  VIII,  Part  I,  p.  127,  Jan.  20, 1832. 


THE  BANK,  THE  STATE  BANKS,  THE  CURRENCY  443 

honest  candor,"  he  continues,  "not  to  acknowledge  that 
the  paper  currency  of  this  country  has  been  wonderfully 
amended  by  its  operations,  and  is,  in  consequence  of  them, 
in  a  state,  not  perfect  indeed,  but  not  reasonably  to  be  com- 
plained of."1  One  thing  is  open  to  no  dispute.  In  some 
way  the  state-bank  currencies  were  vastly  improved  between 
1823  and  1830.  It  may  be  that  the  Bank  of  the  United 
States  was  not  wholly  responsible  for  this  result,  but  certainly 
Biddle  and  countless  others,  friends  and  foes,  believed  it  to 
be  so;  and  as  the  bank  had  been  diligently  toiling  to  attain 
this  end,  and  actually  used  a  multitude  of  means  to  attain 
it,  the  most  reasonable  conclusion  is  that  the  corporation  was 
responsible. 

How  great  the  actual  improvement  was  is  evident  from  a 
review  of  the  status  of  bank  paper  before  1830.  In  1823 
the  Illinois  and  Kentucky  state-bank  currencies  were  worth 
less  than  half  their  face  value.2  In  1824  Tennessee  bank 
paper  was  at  30  per  cent.,3  and  Alabama  paper  at  from  26  to 
28  per  cent,  below  par.*  For  the  years  1824-25  Gouge 
summed  up  the  situation  as  follows :  "  In  Kentucky,  society 
was  in  a  state  bordering  on  anarchy.  In  Alabama  and  Ten- 
nessee, the  paper  of  the  local  banks  was  much  below  par. 
Ohio,  Indiana,  Illinois,  and  Missouri,  had  not  recovered  from 
the  effects  of  the  relief  system.  The  currencies  of  Georgia 
and  North  Carolina  were  very  vacillating."5  In  1825  in  parts 
of  Kentucky  specie  was  at  60  and  100  per  cent,  premium,6 
while  Bank  of  the  Commonwealth  paper  was  worth  only  fifty 
cents  on  the  dollar.7  In  August,  1826,  it  was  announced 
that  "all  the  banks  in  Nashville"  were  "about  to  resume 
specie  payments;"8  and  it  is  significant  that  in  this  year  the 

1  Southern  Review,  Vol.  VIII,  p.  24. 

2  NILES,  Vol.  XXIII,  p.  96 ;  Vol.  XXIV,  p.  342.        3  GOUGE  ( Cobbett's  edition ),  p.  97. 
*  NILES,  Vol.  XXVI,  p.  200.  5  GOUGE  (Cobbett's  edition),  p.  145. 
6  NiLEa,  Vol.  XXVIII,  p.  304,  July  9, 1825,  quoting  the  Versailles  Commonwealth, 
^  Ibid.,  Vol.  XXIX,  p.  4,  Sept.  3, 1825.               8  ibid.,  Vol.  XXX,  p.  416,  Aug.  12, 1826. 


444  THE  SECOND  BANK  OP  THE  UNITED  STATES 

bank  established  a  branch  at  Nashville.  In  1827  there  were 
no  local  banks  in  Kentucky,  Indiana,  Illinois,  or  Missouri, 
while  there  was  but  one  in  each  of  the  states  of  Tennessee, 
Mississippi,  and  Alabama.1  In  1830,  as  already  noticed, 
McDuffie  asserted  that  only  North  Carolina  notes  were 
depreciated.  From  1823  to  1830,  therefore,  the  notes  of 
the  state  banks  everywhere,  with  an  exception  in  the  case  of 
North  Carolina,  had  been  either  driven  out  of  circulation  or 
made  redeemable  in  specie  on  demand. 

Not  only  was  there  an  improvement  in  the  character  of 
the  currency,  but  its  amount  had  been  diminished  in  a 
marked  degree.  Gallatin  states  that  from  1816  to  1820  the 
total  circulation  of  all  the  state  banks  had  fallen  from  $66,- 
000,000  to  less  than  $44,000,000.2  From  that  time  to  1829, 
"with  a  treble  capital  they"  had  "added  little  more  than 
eight  millions  to  their  issues,"  while  the  Bank  of  the  United 
States  had  added  about  $11,000,000  from  November,  1819,  to 
November,  1829.  "The  whole  amount  of  the  paper  cur- 
rency" had  in  that  time  been  increased  about  45  per  cent., 
of  which  increase  the  state  banks  issued  less  than  one-half — a 
wonderful  improvement,  which  Gallatin  attributes  wholly  to 
the  bank.3  During  its  existence  the  state  banks  never  issued 
as  much  paper  as  they  issued  in  1816,  though  population 
had  almost  doubled  and  commercial  dealings  had  increased 
incalculably.* 

Admitting  that  the  bank  restricted  the  state  banks,  did  it 
do  this  to  as  great  an  extent  as  should  have  been  done  ?  Did 
it  bring  the  currency  into  as  good  a  condition  as  was  pos- 
sible? Was  it  as  strict  as  circumstances  demanded?  The 
fact  that  the  state  banks  always  had  such  large  credits  at  the 

1  GOUGE  (Cobbett's  edition),  p.  97. 

2  ADAMS,  Gallatin'a  Writings,  Vol.  Ill,  p.  334.  9  Ibid. 

*  The  amount  of  money  (mostly  paper)  in  circulation  per  capita  in  1816  was  $11 ; 
in  1819,  $7.75 ;  in  1829,  $6 ;  and  from  1829  to  1834,  $6.35.— Woodbury's  tables,  8.  D.  13, 
23d  Cong.,  2d  Sess.,  p.  64. 


THE  BANK,  THE  STATE  BANKS,  THE  CURRENCY  445 

national  bank  would  be  prima  facie  evidence  that  this  was 
not  the  case.  "  It  is  obvious,"  said  Gallatin,  "  that  it  is  only 
by  keeping  its  discounts  at  a  lower  rate  than  those  of  the 
state  banks  that  these  can  be  its  debtors ;  and  that  it  is  only 
by  enforcing  the  payment  of  the  balances  that  it  can  keep 
them  within  bounds  and  thus  regulate  the  currency."1  Now 
the  bank,  even  when  attempting  to  restrict  the  state  banks, 
did  not  enforce  the  payment  of  balances  as  strictly  as  it 
should  have  done.  This  failure  existed,  not  only  under  the 
administration  of  Jones  and  Cheves,  but  also  under  that 
of  Nicholas  Biddle.  In  1825  he  writes  the  cashier  at  Balti- 
more that  he  held  it  "good  policy"  for  the  time  being  "not 
to  be  too  rigid  in  our  drafts"  on  the  state  banks.2  In  1826 
he  instructs  the  president  of  the  New  York  branch  not  to 
call  for  specie,  unless  first  called  on  for  specie,3  and  in  1832 
he  laid  particular  emphasis  upon  the  virtue  of  forbearance 
in  demanding  specie  from  the  state  banks.* 

Insufficient  exercise  of  its  power  is  also  apparent  in  the 
continued  worthlessness  of  some  of  the  state-bank  paper. 
In  June,  1829,  the  New  York  Herald  asserted  that  there 
were  "a  great  many  bills  in  circulation"  in  that  city  which 
were  "  worth  literally  nothing  at  all,"  and  Niles  adds  that 
the  same  state  of  affairs  exists  in  Philadelphia,  Boston,  and 
Baltimore.5  Moreover,  in  many  of  the  states  notes  of  a 
denomination  as  low  as  $1  circulated,  and  specie  was  paid 

1  "  Suggestions  on  the  Banks  and  Currency,"  ADAMS,  Gallatin's  Writings,  Vol. 
Ill,  p.  395.    See  also  8.  D.  13,  23d  Cong.,  2d  Sess.,  pp.  29,  30,  for  Woodbury's  opinion. 

2  Biddle  to  John  White,  April  19, 1825,  P.  L.  B.,  Vol.  II,  p.  15. 

3  Biddle  to  Lawrence,  Feb.  8,  1826,  ibid.,  p.  127.    The  same  instructions  were 
repeated  in  March.— Cope  to  Lawrence  for  the  board,  March  23, 1826,  ibid.,  p.  142. 

*  "Approaching,  as  we  are,  the  1st  of  October  when  we  will  inevitably  become 
largely  in  debt  to  the  State  Banks  we  ought  to  forbear  from  pressing  them  now  in 
order  to  deserve  and  to  ensure  a  reciprocal  forbearance  when  our  relative  situations 
change,  and  our  whole  effort  should  be  to  keep  the  State  Banks  at  their  ease,  so  that 
if  we  are  compelled  to  curtail  they  may  supply  our  place  —  and  in  the  meantime 
devote  all  our  surplus  means  to  the  purchase  of  exchange  and  the  redemption  of  the 
3  per  cents."— Biddle  to  Cadwalader,  Washington,  July  1, 1832,  B.  P. 

5  NILES,  Vol.  XXXVI,  p.  251,  quoting  the  New  York  Herald. 


446  THE  SECOND  BANK  OF  THE  UNITED  STATES 

only  for  sums  less  than  one  dollar,  while  in  the  two  Carolinas 
"  and  some  other  parts  of  the  Union,  notes  for  twenty-five 
cents,  for  twelve  and  one-half  cents,  and  even  six  and  one- 
quarter  cents  "  were  "current." J  Now,  while  the  bank  might 
have  checked  this  by  putting  pressure  upon  the  banks  issuing 
sums  for  less  than  $5,  it  apparently  did  not  choose  to  do  so,2 
because  it  did  not  care  to  suffer  the  certain  unpopularity 
which  would  have  followed  drastic  measures.  Hence  it  per- 
mitted an  immense  circulation  of  notes  of  less  value  than 
$5  —  calculated,  indeed,  at  almost  one-fourth  of  the  amount 
of  currency  issued  by  the  state  banks.3 

Yet  it  would  be  grossly  unjust  to  censure  the  manage- 
ment of  the  bank  without  first  considering  the  enormous 
obstacles  in  its  way.  The  restraints  placed  upon  the  state 
banks  were  bitterly  resented,  and  the  difficulty  of  keeping 
this  up  in  the  face  of  a  Democratic  opposition  which  sup- 
ported the  local  banks  must  be  too  obvious  to  need  comment. 
The  struggle  of  the  bank  with  the  banks  of  Georgia  and  with 
the  state  of  Georgia,  with  the  banks  of  Ohio  and  with  the  state 
of  Ohio;  the  opposition  of  the  southern  and  western  states 
all  through  the  presidency  of  Cheves,  will  not  be  forgotten. 
Similarly,  during  Biddle's  administration,  the  opposition  of 
Alabama  to  the  establishment  of  a  bank  was  equally  strenuous. 
Again,  in  September,  1831,  the  Bank  of  Maryland  protested 
against  the  action  of  the  bank  in  attempting  to  force  payment 
for  its  notes.4  The  bank  was  forced  to  yield,  for  such  oppo- 
sition at  that  moment  might  be  fatal  to  the  chances  for 
re-charter.  Perhaps  the  best  illustration  of  its  difficulties, 

1  GOUGE,  An  Inquiry  into  the  Principles  of  the  American  Banking  System,  p.  21. 

2  It  was  even  argued  that,  since  the  Bank  of  the  United  States  did  not  take  bills 
under  $5,  and  since  these  "  constitute  nearly  a  quarter  of  the  circulation  of  the  state 
banks,"  the  bank  could  not  control  the  state  banks. — Remarks  upon  the  Bank  of  the 
United  States  by  a  Merchant,  p.  30.    If,  however,  the  state  banks  issued  bills  of  $5, 
which  were  received  by  the  Bank  of  the  United  States,  they  might  be  controlled 
quite  as  effectively  no  matter  how  much  fractional  currency  was  issued. 

.,  loc.  cit.  4  Biddle  to  E.  Oliver,  Sept.  10, 1831,  B.  P. 


THE  BANK,  THE  STATE  BANKS,  THE  CUBEENCY  447 

however,  is  found  in  its  strife  with  the  Bank  of  the  State  of 
South  Carolina  in  1832.  Up  to  December  of  that  year  the 
Charleston  branch  of  the  Bank  of  the  United  States  had 
been  accustomed  to  take  the  notes  of  any  of  the  branches 
from  this  bank  in  payment  of  debts.1  This  was  certainly  a 
favor  to  the  Bank  of  the  State,  and  one  which  prevented 
any  stringent  restraint  of  its  business.  In  December, 
1832,  however,  the  office  began  to  refuse  the  receipt  of  the 
notes  of  other  branches  and  also  declined  to  take  the  notes 
of  other  state  banks  from  the  Bank  of  the  State  of  South 
Carolina.2  Great  excitement  resulted:  Hayne,  McDuffie, 
and  Hamilton  protested,  while  the  latter  assured  Biddle 
that  South  Carolina  would  nullify  the  bank  charter  as  well 
as  the  tariff  of  1832  if  redress  was  not  accorded.3  Governor 
Hayne  actually  risked  his  popularity  by  his  exertions  to  stay 
hostile  action  by  the  legislature.4  Biddle  at  once  instructed 
the  president  at  Charleston  to  put  an  end  to  the  causes  of 
complaint.5  Such  events  aid  in  measuring  the  significance 
of  Biddle' s  assertion  that,  while  the  state  banks  were  care- 
fully kept  "  within  proper  limits,"  they  were  "  never  forced 
to  pay  specie,  if  it "  could  "  be  avoided,"  and  that  the  bal- 
ances were  "suffered  to  lie  occasionally  until "  the  debtor 
bank  "  could  turn  round." 6  On  the  whole,  the  bank  is  deserv- 
ing of  high  praise  for  the  control  actually  exercised  in  such 
circumstances. 

There  was,  however,  another  extremely  serious  aspect  of 
the  situation.  The  mere  demand  for  specie  was  very  unpopu- 
lar. "If  you  call  for  specie,"  wrote  Lenox,  "it  fixes  an 

1  J.  Hamilton,  Jr.,  to  Biddle,  Dec.  20, 1832,  ibid. 

2  Biddle  to  President  Johnson  of  the  Charleston  office,  Dec.  25,  1832,  S.  D.  17, 
23d  Cong.,  2d  Sess.,  p.  310. 

3  J.  Hamilton,  Jr.,  to  Biddle,  Dec.  20, 1832,  B.  P. 
*  Hayne  to  Biddle,  Dec.  15, 1832,  ibid. 

5  Biddle  to  Johnson,  Dec.  25, 1832,  S.  D.  17,  23d  Cong.,  2d  Sess.,  p.  310. 

6  Eeport  of  the  Senate  committee,  March  29, 1830, 8.  D.  50, 22d  Cong.,  1st  Sess.,  p.  25. 


448  THE  SECOND  BANK  OP  THE  UNITED  STATES 

odium  upon  us,"1  and  no  doubt  Biddle  enunciated  a  trite 
truth  when  he  asserted  that  the  state  banks  were  "never 
forced  to  pay  specie,  if  it  can  be  avoided."  Equally  true  was 
it  that  the  Bank  of  the  United  States  never  paid  specie  if  it 
could  be  avoided.  Biddle  in  1828  instructed  Lenox  that  no 
coin  was  to  be  paid  out  for  exportation  if  possible  to  evade  it,2 
and  in  1823  he  wrote:  "Whenever  there  is  a  draft  from  an 
individual  for  specie  to  any  amount  the  State  Banks  are  made 
to  pay  it  if  the  Balances  allow  it."8  In  1829  the  branch  at 
Baltimore  in  selling  a  draft  upon  the  parent  office  stipulated 
"that  it  was  not  to  be  used  as  a  specie  demand  upon  the 
Bank."*  The  habit  of  avoiding  specie  demands  was,  in 
fact,  universal  in  the  United  States.  "It  is  quite  amusing," 
wrote  an  Englishman  who  had  resided  in  America,  "to  observe 
the  care  which  merchants  in  America  take  to  prevent  runs  on 
banks,  and  keep  hard  money  out  of  use."6  The  result  was 
twofold:  specie  was  kept  out  of  circulation,  and  it  was  so 
scarce  that  the  business  of  the  country  was  necessarily  sub- 
ject to  those  vibrations  which  Biddle  constantly  mentioned6 
and  Gouge  emphasized.  Perhaps,  too,  such  shocks  were 
necessarily  incident  to  the  industrial  conditions  of  a  new 
country,  and  the  American  temperament  was  partly  respon- 
sible: "Our  active  and  energetic  countrymen,"  wrote  Biddle, 
"want  no  stimulant  to  over  exertion.  They  always  carry  so 
much  sail,  that  the  man  at  the  wheel,  must  try  to  keep  his  hand 
strong  and  his  head  cool." 7  Moreover,  the  amount  of  specie 
in  the  country  was  very  small,  and  for  the  most  part  lay  in 

i  Lenox  to  Biddle,  Feb.  28, 1828,  B.  P.  2  Biddle  to  Lenox,  Feb.  27, 1828,  ibid. 

3  To  C.  P.  White,  of  New  York,  Feb.  3, 1823,  P.  L.  B.,  Vol.  I,  p.  6. 
*  John  White  to  Biddle,  Baltimore,  March  4, 1829,  B.  P. 

BEDWAKD  CLIBBOEN,  An  Outline  of  the  American  Debit  or  Banking  System, 
p.  31,  note  1. 

6  "  In  the  active  commercial  business  of  this  country,  there  are  constant  vibra- 
tions."—Biddle,  H.  B.  460,  22d  Cong.,  1st  Sess.,  p.  333.  Also  in  his  article  of  April  10 
in  the  National  Gazette. 

i  Biddle  to  Senator  Smith,  Nov.  14, 1830,  P.  L.  B.,  Vol.  Ill,  p.  392, 


THE  BANK,  THE  STATE  BANKS,  THE  CUKBENOY  449 

the  banks  along  tlie  Atlantic  seaboard.1  The  cause  of  this 
slender  stock  lay  not  only  in  the  pernicious  habit  of  evading 
specie  calls,  and  in  the  public  disfavor  meted  out  to  those  who 
demanded  specie,  but  also  in  the  unusual  facilities  given  by 
the  state  laws  for  the  emission  of  small  notes. 

Under  these  circumstances,  the  problem  of  neutralizing 
Biddle's  "constant  vibrations"  and  of  checking  an  incipient 
panic  became  a  very  difficult  one.  Biddle  declared  to  Gal- 
latin  that  the  Bank  of  the  United  States  was  essential  to  the 
country  in  this  respect,  that  it  alone  possessed  the  power  of 
warding  off  constant  shocks  to  commerce,  and  that  it  did  this 
by  buying  and  selling  foreign  exchange  and  thus  prevent- 
ing the  exportation  of  specie. 2  No  doubt  the  bank's  services 
in  this  respect  were  sometimes  important,  but  it  would  be 
difficult  for  it  to  draw  bills  unless  it  had  accumulated  funds 
abroad.  As  Biddle  pertinently  put  it  during  the  pressure 
of  1828:  "How  this  drawing  is  to  be  performed  without  hav- 
ing accumulated  any  fund  to  draw  upon,  is  not  clearly  indi- 
cated."3 In  case  this  method  failed,  as  it  was  sure  to  do 
during  a  commercial  crisis,  there  remained  several  other 
means  of  checking  the  panic.  Stock  might  have  been  sold 
abroad,  and  thus  a  store  of  specie  secured,  or  the  time  of 
discounts  might  have  been  shortened,  and  the  English  meth- 
od of  a  rise  in  the  rate  of  discount  might  have  been  adopted. 

Unfortunately,  the  bank  could  not  raise  its  rate,  because 
it  was  bound  by  its  charter  to  loan  at  6  per  cent.  Even  had 
it  been  able  to  vary  its  rate,  the  idea  of  doing  this  would 
hardly  have  occurred  at  that  time.  The  other  methods  were 
employed,  therefore.  Thus  in  1825  United  States  stocks  were 

i "  Now  the  basis  of  our  circulation  medium,  from  its  being  chiefly  in  the  vaults 
of  Banks  at  the  seaports,  is  liable  to  sudden  and  extensive  redaction,  often  compel- 
ling the  banks  to  extensive  and  equally  sudden  reductions  in  their  discounts  and  cir- 
culation."— Outline  of  a  Plan  for  a  National  Bank,  p.  13. 

2  See  pp.  Ill,  112. 

3  Article  in  the  National  Gazette,  April  10, 1828.    See  for  extracts  GOUGE  (Cob- 
bett's  edition),  pp.  150-55. 


450  THE  SECOND  BANK  OP  THE  UNITED  STATES 

sold,  specie  secured,  and  the  bank  continued  to  loan.1  But 
the  national  debt  was  discharged  in  1834,  and  indeed  this 
method  of  meeting  an  emergency  ceased  early  in  1832,  so  far 
as  the  bank  was  concerned.  Even  in  1828  it  could  not  sell 
stocks  for  cash.  In  such  circumstances  it  was  compelled 
after  seasons  of  brisk  trading  to  shorten  its  term  of  discounts 
and  try  to  collect  from  its  debtors.2  These  measures  would 
be  effective  in  saving  the  bank,  but  they  would  only  intensify 
the  panic  and  carry  commercial  ruin  farther.  Still,  in  a 
season  of  great  stringency  one  could  hardly  expect  the  bank 
to  dispense  loans  without  regard  for  the  consequences.  Had 
there  been- an  understanding  with  the  state  banks  and  con- 
certed action,  loans  could  have  been  made,  and  the  panic 
thus  checked.  But  when  each  bank  jealously  watched  the 
others  and  tried  to  avoid  its  own  ruin,  the  Bank  of  the 
United  States  cannot  be  severely  censured  for  its  policy. 

It  is  surprising,  on  the  whole,  that  the  corporation  had 
to  adopt  such  drastic  methods  as  seldom  as  it  did.  After 
the  administration  of  Jones  such  occasions  came  only  twice : 
once  in  1828  and  once  in  1831-32.  In  both  cases  the  bank 
got  through  without  injury  to  itself,  and  the  business  of  the 
country  was  not  seriously  checked. 

The  correction  of  the  evil  would  have  involved,  there- 
fore, the  training  of  the  public  to  make  demands  for  specie 
and  the  passage  of  laws  prohibiting  the  issue  of  small  notes. 
Biddle  frequently  gave  it  as  his  opinion  that  the  "metallic 
basis"  of  the  currency  should  be  widened,  and  he  suggested,  as 
did  Gallatin  and  Webster,  the  abolition  of  the  use  of  small  notes 
and  the  laying  of  heavy  penalties  for  a  refusal  to  pay  specie.3 
He  believed  that  if  the  banks  were  compelled  to  withdraw  all 
their  notes  below  the  denomination  of  $5  the  currency  would 
be  vastly  improved.4  Undoubtedly  the  view  was  correct. 

i  See  p.  107.  2  See  Biddle  in  the  National  Gazette. 

3H.  R.  460,  22d  Cong.,  1st  Sess.,  p.  367. 

*  Biddle  to  Gallatin,  Sept.  9, 1830,  P.  L.  B.,  Vol.  Ill,  pp.  340,  341. 


THE  BANK,  THE  STATE  BANKS,  THE  CURRENCY  451 

The  bank's  control  varied  greatly  with  the  location  of 
the  state  bank,  with  the  business  habits  of  the  community, 
with  the  state  of  public  opinion,  and  with  its  own  circula- 
tion. In  New  England  it  would  have  little  control,  for  it 
did  a  very  restricted  business.  In  the  large  cities  banking 
methods  were  much  better  understood  and  the  community 
would  support  it  in  its  attempts  to  restrain  bad  banking; 
but  in  the  country  districts,  and  in  the  far  South  and  West, 
the  task  was  almost  insuperably  difficult. 

What  the  Bank  actually  did  brought  down  upon  its 
head  the  violent  enmity  of  the  state  banks.  This  was  so 
because  the  bank,  in  reducing  the  business  of  the  state  banks, 
not  only  hindered  them  from  engaging  in  unjustifiable  opera- 
tions, but  actually  diminished  their  legitimate  business  by 
attracting  this  to  its  own  offices.  So  powerful  was  the  con- 
sequent opposition  that  in  1832,  when  the  new  charter  was 
before  Congress,  the  friends  of  the  bank  were  forced  to 
accept  an  amendment  which  would  have  gone  far  to  deprive 
the  bank  of  its  control  over  the  currency,  for  it  allowed  the 
state  banks  to  present  any  of  the  notes  of  the  bank  to  any 
of  the  branches  in  payment  of  debts.1 

Gallatin  was  of  the  opinion  that  the  bank  lost  its  power 
to  regulate  the  currency  as  early  as  1832-33,  because  in 
those  years  its  discounts  and  issues  were  excessive.2  The 
fact  that  the  state  banks  were  indebted  to  the  national  bank 
all  through  these  years  shows  that  this  was  an  error.  The 
bank  lost  its  power  only  in  1835,  in  which  year  the  balances 
ran  against  it  for  much  of  the  time  and  ranged  from  $62,000 
to  $3,987,000.  The  removal  of  the  deposits  had  been  the 
first  blow,  but  this  was  by  no  means  immediately  effective, 
as  is  shown  by  the  history  of  the  years  1833-34,  when  the 

1  See  the  fourth  section  of  the  bill  to  renew  the  charter.  Appendix  IV.    See  also 
Dallas's  speech  in  introducing  the  bill,  May  23, 1832,  C.  D.,  Vol.  VIII,  Part  I,  p.  948. 

2  "  Suggestions  on  the  Banks  and  Currency,"  ADAICS,  QallatMs  Writings,  Vol. 
Ill,  p.  394. 


452  THE  SECOND  BANK  OF  THE  UNITED  STATES 

bank  was  a  heavy  creditor  of  the  state  banks.  The  second 
blow  was  the  prohibition  of  the  receipt  of  branch  drafts  in 
payment  of  government  dues,  which  took  effect  in  January, 
1835 ;  yet  even  these  two  measures  would  not  have  robbed 
the  bank  of  its  mastery  had  it  chosen  to  exercise  it.  But  by 
this  time  it  was  beginning  to  settle  its  affairs,  its  system  was 
broken  up,  and  the  state  banks  were  allowed  to  run  their 
own  course. 


CHAPTEK  XIX 
THE  BANK  AS  A  GOVERNMENT  AGENCY 

THE  charter  of  the  bank  denned  its  duties  to  the  govern- 
ment and  the  privileges  accorded  it  for  their  performance. 
It  was  bound  to  transfer  public  funds  from  one  part  of  the 
Union  to  another,  without  making  any  charge  for  exchange 
or  for  transportation;  on  the  same  terms  it  was  to  act  as 
commissioner  of  loans  when  required  by  Congress,  and  to  pay 
the  public  creditors.1  It  paid  to  the  government  a  bonus  of 
$1,500,000,  and  was  bound  at  the  demand  of  the  treasury  to 
transfer  to  the  United  States  any  stocks  subscribed  to  its 
capital  at  the  price  of  the  stock  when  subscribed.2 

In  return,  certain  valuable  privileges  were  bestowed  upon 
the  corporation.  Its  notes  were  to  be  legal  tender  in  all 
payments  to  the  United  States;3  it  might  sell  government 
stocks  to  the  amount  of  $2,000,000  annually,  provided  that 
the  secretary  of  the  treasury  was  first  given  the  option  of 
purchasing;*  the  public  funds  had  to  be  deposited  in  its 
vaults  in  every  state  in  which  it  established  an  office,5  and 
the  United  States  contracted  not  to  create  any  other  national 
bank  during  its  existence.8 

The  financial  embarrassments  which  almost  overwhelmed 
the  government  just  prior  to  the  erection  of  the  bank  were 
rapidly  overcome  after  it  began  operations.  The  notes  of 
the  bank  at  once  supplied  the  government  with  a  common 
medium  of  exchange  in  which  it  paid  its  debts  and  received 
its  dues.  In  January,  1817,  the  bank  loaned  the  government 

1  Charter,  sec.  15.    See  Appendix  I.    In  relation  to  the  bank's  duties  as  com- 
missioner of  loans,  see  Statutes  at  Large,  Vol.  Ill,  p.  360. 

2  Charter,  sees.  5  and  6.  Including  the  $7,000,000  stock  subscription  of  the  govern- 
ment. 

3  Ibid.,  sec.  14.  *  Ibid.,  sec.  5.  s  ibid.,  sec.  16.  «  Ibid.,  sec.  21. 

453 


454  THE  SECOND  BANK  OP  THE  UNITED  STATES 

$500,000  as  a  fund  out  of  which  to  pay  its  most  urgent  lia- 
bilities,1 and  began  immediately  afterward  to  discount  notes 
of  merchants  having  duty  bonds  to  pay.2  Finally,  by  enter- 
ing into  the  agreement  of  the  1st  of  February  with  the  state 
banks,  by  which  they  contracted  to  pay  specie  for  their 
notes,  it  virtually  established  the  resumption  of  specie  pay- 
ments. The  treasury  thenceforth  could  accept  either  notes 
of  the  Bank  of  the  United  States  or  those  of  the  large  state 
banks  without  loss  or  annoyance  to  itself. 

But  while  relief  was  given,  its  extent  varied  in  different 
parts  of  the  Union.  In  the  West  and  South,  for  instance,  the 
currency  was  much  depreciated,  yet  in  these  sections  the 
secretary  of  the  treasury  believed  it  expedient,  indeed  neces- 
sary, that  the  United  States  should  accept  large  quantities  of 
state-bank  paper  in  payments  on  government  account.  This 
necessity  existed  because  in  many  parts  of  the  interior  notes 
of  the  Bank  of  the  United  States  could  not  be  supplied,  and 
consequently  so  long  as  large  amounts  were  paid  in,  on 
account  of  direct  taxes,  internal  revenue,  and  the  sale  of 
public  lands,  the  paper  of  state  banks  had  to  be  received.3 
Yet  even  so,  most  of  the  difficulties  of  the  government  in 
the  West  and  South  also  disappeared  for  the  time,  because  the 
Bank  of  the  United  States  received  almost  all  state-bank 
notes,  and  credited  them  to  the  treasury  as  cash.* 

But  while  the  receipt  of  state-bank  paper  terminated  the 
major  part  of  the  embarrassments  of  the  treasury,  it  initiated 
those  of  the  bank.  The  discovery  was  early  made  that  the 
paper  received  was  not  equivalent  to  gold  and  silver.  Con- 

1  Smith  to  Crawford,  Jan.  4, 1817,  F.,  Vol.  IV,  p.  764. 

2  Resolution  of  the  board,  Jan.  9,  1817,  ibid.,  p.  766. 
3 Crawford  to  Jones,  May  6, 1817,  ibid.,  p.  524. 

*  "  The  notes  of  all  such  banks,  in  the  western  States,  were  received  by  the  land 
officers  and  deposited  as  specie  in  the  offices  of  the  Bank  of  the  United  States  and  in 
the  State  banks,  employed  as  offices  of  deposit." — Crawford,  report  to  a  committee 
of  the  House  of  Representatives,  Feb.  24, 1823,  ibid.,  p.  262. 


THE  BANK  AS  A  GOVERNMENT  AGENCY    455 

sequently  the  bank  was  soon  forced  to  abrogate  the  custom 
of  receiving  the  notes  of  most  of  the  state  banks  of  the  inte- 
rior.1 Since  Secretary  Crawford  still  thought  that  the 
treasury  could  not  collect  the  taxes  without  accepting  these 
notes,  the  bank's  action  threw  the  public  funds  into  some 
confusion,  which  was  much  increased  in  the  fall  of  1818, 
when  the  bank,  out  of  regard  for  its  own  safety,  refused  to 
receive  as  specie  the  issues  of  all  the  western  state  banks, 
though  it  accepted  them  as  special  deposits.2  This  measure 
was  supplemented  in  October,  1819,  by  an  order  prohibit- 
ing the  western  branches  from  making  any  further  note 
issues.3  As  a  result  the  usefulness  of  the  bank  to  the 
treasury  was  much  impaired,  the  government  being  com- 
pelled to  receive  larger  quantities  than  ever  of  the  paper 
of  state  banks  in  payment  of  government  dues  in  the  West 
and  South.4 

In  1820  another  arrangement  was  made,  by  which  the 
bank  was  to  receive  the  notes  of  certain  specified  state  banks 
in  payment  of  government  dues.  The  notes  of  the  western 
banks  in  the  immediate  neighborhood  of  the  branches 
receiving  the  public  moneys  were  among  the  number,  but 
were  taken  only  on  condition  that  if  not  redeemable  on 
presentation  the  government  should  be  responsible  for  their 

i"With  these  facts  in  view,  we  should  be  extremely  culpable  to  involve  the 
credit  and  responsibility  of  this  institution  with  the  obligations  of  banks  in  remote 
parts  of  the  country,  of  whose  capacity,  credit,  and  good  disposition  we  have  no  cer- 
tain knowledge.  The  public  interest  may  impose  upon  the  Government  the  necessity 
of  facilitating  the  collection  of  the  revenue  by  receiving  the  paper  of  such  banks, 
....  but  until  it  shall  be  converted  into  lawful  money,  or  funds  of  equal  value,  the 
Bank  of  the  United  States  cannot  assume  it  as  cash." — Jones  to  Crawford,  May  29, 
1818,  ibid.,  p.  846. 

2  "  This  state  of  collision  and  irritation  continued  increasing  until  the  autumn 
of  1818,  when  the  bank  notified  the  Department  that  it  could  no  longer  execute  its 
arrangement  without  sacrificing  the  essential  interests  of  the  institution;  at  the 
same  time  it  declared  its  determination  to  receive  from  the  land  offices  nothing  but 
its  own  notes  and  the  current  coin  of  the  Union,  except  as  special  deposit." — Craw- 
ford to  a  committee  of  the  House,  Feb.  24, 1823,  ibid.,  p.  262. 

3  Resolutions  of  Sept.  25, 1819,  sec.  14,  ibid.,  p.  908. 

*  Crawford  to  a  committee  of  the  House,  Feb.  24, 1823,  ibid.,  pp.  262,  283. 


456  THE  SECOND  BANK  OF  THE  UNITED  STATES 

payment.1  This  arrangement  existed  until  the  removal  of 
the  deposits.2  The  receivers  deposited  the  notes  in  the 
Bank  of  the  United  States,  and  these  were  credited  by  the 
bank  to  the  government  as  cash,  making  them  immediately 
available  for  government  use.3 

The  bank  had  also  materially  assisted  the  government  in 
the  collection  of  what  were  known  as  "special  deposits." 
These  were  deposits  of  state-bank  notes  which  were  not 
immediately  convertible  into  specie,  because  the  bank  issuing 
them  either  had  ceased  to  pay  specie,  or  was  so  distant  from 
the  place  at  which  the  notes  had  been  received  that  they 
could  not  be  conveniently  presented  for  redemption.  Such 
notes  could  not  be  used  as  cash,  though  their  eventual  pay- 
ment was  expected.  When  the  bank  began  operations,  a 
large  quantity  of  "  special  deposits"  was  credited  to  the  gov- 
ernment at  the  various  state  banks  throughout  the  Union,  and 
the  directors  made  arrangements  with  the  United  States  to 
collect  these  and  convert  them  into  cash  for  the  government 
by  presenting  them  to  the  institutions  which  had  issued 
them.4  The  task  was  a  difficult  and  thankless  one.  Every 
insecure  little  bank  attempted  to  pass  off  its  notes  as  cash, 
while  banks  which  held  government  funds  which  had  been 
entered  as  cash  to  the  credit  of  the  government  years  before, 

1 "  I  am  instructed  to  say  that  the  bank  agrees  to  your  proposition  concerning 
the  receipt  of '  western  notes,'  on  condition,  however,  that  if  not  paid  on  present- 
ment, they  shall  be  charged  to  the  Treasury."— Che ves  to  Crawford,  July  28,  1820. 
F.,  Vol.  IV,  p.  939.  Crawford  accepted  this  condition.— July  31,  ibid.,  p.  671. 

2  Thus  Secretary  Rush  in  1826  and  in  1827  issued  instructions  to  the  receivers  at 
the  land  offices  designating  the  state-bank  paper  which  might  be  received  in  pay- 
ments to  government.—  Circular  of  Feb.  22, 1826,  S.  D.  193, 20th  Cong.,  1st  Sess.,  pp.  57-9. 
This  lasted  until  Jan.  1, 1828,  when  it  was  changed  by  prohibiting  the  receipt  of  "  the 
notes  of  any  local  or  State  bank  not  established  or  existing  in  the  State  or  Territory 
where  the  Land  Office  is  situated." — Supplementary  instruction  of  Aug.  22, 1827,  by 
Secretary  Rush,  ibid.,  pp.  59,  60. 

3 "It  receives  the  paper  of  the  State  banks  paid  on  public  account  in  the 
interior,  as  well  as  elsewhere,  and  by  placing  it  to  the  credit  of  the  United  States 
as  cash,  renders  it  available  wherever  the  public  service  may  require."— Rush's 
report,  Dec.  9, 1828,  8.  D.  7,  20th  Cong.,  2d  Sess.,  p.  10. 

*  See  the  arrangement  finally  made.— Jones  to  Crawford,  Feb.  28, 1817,  F.,  Vol. 
IV,  p.  773. 


THE  BANK  AS  A  GOVERNMENT  AGENCY    457 

now  tried  to  have  them  taken  off  their  hands  as  "special 
deposits."  1  In  the  face  of  these  obstacles,  the  bank  man- 
aged to  collect  between  April  11, 1817,  and  December  4, 1818, 
the  sum  of  $3,278,710.98.a  It  then  abandoned  the  task8 
because  of  the  trouble  and  annoyance  caused  by  the  attempt 
to  collect  and  the  bitter  feeling  aroused  among  the  state  banks.4 
The  bank  lost  a  considerable  sum  as  a  result  of  its  labors.5 

The  receipt  of  state-bank  paper  on  government  account 
was  only  one  part  of  a  general  plan  to  simplify  the  opera- 
tions of  the  treasury  through  the  instrumentality  of  the 
Bank  of  the  United  States.  This  plan  included,  in  addi- 
tion, a  close  relation  with  a  number  of  state  banks  selected 
by  the  bank  to  act  as  agents  of  the  government  in  keeping 
the  public  deposits  and  performing  the  duties  of  commis- 
sioners of  loans  and  pension  agents  in  those  states  where 
the  bank  had  no  branches.  By  October  31,  1817,  thirty- 
four  state  banks  had  been  selected  for  this  purpose.8  The 
accounts  of  the  public  money  in  these  were  kept  with  the 
bank  instead  of  with  the  treasury,  as  had  been  the  custom 
previously,7  thus  materially  simplifying  the  accounts  of  the 

1 "  Even  the  acknowledged  cash  deposit  at  the  Bank  of  Chambersburg  is  now 
attempted  to  be  passed  as  a  special  deposit."— Jones  to  Crawford,  March  12, 1817, 
ibid.,  p.  776. 

2 The  amounts  of  the  "special  deposits"  to  the  credit  of  the  treasury  of  the 
United  States  were  as  follows:  in  Jan.,  1817,  $3,031,459.36;  by  July  1,  $3,072,652.89; 
Jan.  1, 1818,  $1,991,818.88 ;  Jan.  1,  1819,  $666,959.24 ;  on  July  1,  $803,976.59 ;  Jan.  1, 1820, 
the  amount  was  $679,778.04;  on  Jan.  1, 1821,  $548,663.23;  Jan.  1, 1822,  $564,962.92;  and  on 
Jan.  1, 1823,  it  was  $333,504.66.— Ibid.,  pp.  303-21  and  pp.  353, 354.  As  a  result  of  accept- 
ing the  notes  of  southern  and  western  banks  in  payments  to  government  the  "spe- 
cial deposit"  account  was  increased  after  1817  by  $635,304.60.— Ibid.,  p.  352. 

s  "  I  have  instructed  the  Treasurer  to  transfer  by  drafts  to  the  Bank  of  Columbia 
the  amount  of  special  deposit  returned  by  the  Bank  of  the  United  States  to  his  credit 
on  the  23d  ultimo,  being  $468,588,37."— Crawford  to  Smith,  Dec.  4, 1818,  ibid.,  p.  600. 

*  See  evidence  of  difficulties,  ibid.,  pp.  855-7. 

6  "  The  loss  sustained  by  the  bank  I  cannot  estimate.  I  should  willingly  com- 
promise for  a  loss  of  only  $200,000." — Biddle  to  Senate  Finance  Committee,  S.  D.  50, 
22d  Cong.,  1st  Sess.,  p.  25. 

6  Jones  to  Crawford,  Oct.  25, 1817,  F.,  Vol.  IV,  p.  820 ;  and  same  to  same,  Oct.  31, 
1817,  ibid.,  p.  821. 

7 "Pursuant  to  arrangements  made  with  the  Bank  of  the  United  States,  the 
•weekly  returns  of  the  money  deposited  in  the  several  offices  and  State  banks 


458  THE  SECOND  BANK  OP  THE  UNITED  STATES 

department  and  saving  it  much  expense.1  The  bank  trans- 
mitted weekly  statements  to  the  secretary  and  to  the  treas- 
urer of  the  sums  received  by  it,  as  did  also  its  branches 
and  the  state  banks  which  acted  as  its  agents,  specifying 
the  sources  from  which  the  payments  came.2  In  this  way 
the  treasury  officials  knew  precisely  what  dues  were  paid,  on 
what  account  they  were  paid,  at  what  places  they  were  paid, 
and  at  what  places  they  were  available.  They  were  also  fur- 
nished with  a  means  of  checking  the  accounts  of  the  collectors 
and  receivers,  for  these  officers  in  turn  were  obliged  to  forward 
to  the  treasury  accounts  of  the  moneys  they  had  paid  in, 
which  had  to  agree  with  the  returns  made  by  the  bank.3  Under 
this  system  there  was  little  opportunity  for  fraud  on  the  part 
of  individuals,  and  after  the  funds  had  passed  into  the  pos- 
session of  the  bank,  it  was  liable  for  their  safety  to  the 
extent  of  its  entire  capital 

employed  for  that  purpose  to  the  credit  of  the  Treasurer  or  the  United  States,  which 
have  heretofore  been  made  to  this  Department,  are  to  be  made  hereafter  to  the  Cashier 
of  that  bank." — Crawford's  circular  to  the  deposit  banks,  April  29, 1817,  S.  D.  50,  22d 
Cong.,  1st  Sess.,  p.  521. 

1  See  the  plan  suggested  by  Jones. — Jones  to  Crawford,  April  17, 1818,  ibid.,  p.  782. 
Accepted  with  modifications  by  Crawford,  April  22, 1817.— Ibid.,  p.  519. 

2  "  Weekly  returns  to  this  office  and  to  the  Treasurer  of  the  United  States  will, 
therefore,  be  required  from  the  Bank  of  the  United  States,  and  from  the  branch 
banks,  of  the  amount  of  the  public  money  paid  to  them,  respectively,  by  the  Col- 
lectors, showing  the  aggregate  amount  at  the  time  of  each  successive  statement. 
....  The  payments  made  to  the  bank  should  be  distinguished  under  three  heads, 
viz:  customs,  internal  revenue,  and  direct  tax." — Crawford  to  Jones,  Jan.  16,  1817, 
ibid.,  pp.  496,  497. 

"  Every  receipt  given  for  public  money  must  show  the  branch  of  revenue  from 
which  it  has  accrued,  ....  The  weekly  statement  made  to  the  Bank  of  the  United 
States  must  strictly  correspond  with  those  receipts." — Crawford's  circular  to  the 
deposit  banks,  April  29, 1817,  ibid.,  pp.  521,  522. 

3  "According  to  the  existing  regulations,  the  Collectors  of  Customs  are  required 
to  make  weekly  statements  of  the  amount  of  revenue  received  by  them  and  paid  into 
the  banks ;  weekly  returns  to  this  office  and  to  the  Treasurer  of  the  United  States 
will,  therefore,  be  required  from  the  Bank  of  the  United  States,  and  from  the  branch 
banks,  of  the  amount  of  the  public  money  paid  to  them,  respectively,  by  the  Col- 
lectors, showing  the  aggregate  amount  at  the  time  of  each  successive  statement. 
These  statements  are  necessary  as  checks  upon  the  returns  of  the  Collectors,  and  to 
enable  the  officer  charged  with  keeping  the  accounts  of  the  Secretary  of  the  Treasury 
to  correct  any  errors  which  may  result  from  irregularities  in  the  returns  of  the  Col- 
lectors."—Crawford  to  Jones,  Jan.  16, 1817,  ibid.,  pp.  496,  497. 


TEE  BANK  AS  A  GOVERNMENT  AGENCY    459 

In  accordance  with  this  plan  the  numerous  transactions  of 
the  treasury  were  conducted  through  the  cashier  of  the  Bank 
of  the  United  States.  The  revenue  came  in  from  customs, 
direct  taxes,  land  sales,  the  post-offices,  the  marshals  of  the 
United  States  courts,  and  a  number  of  miscellaneous  sources. 
These  funds,  paid  in  at  ten  thousand  different  places  through- 
out the  country,  were  all  deposited  by  the  officials  receiving 
them  in  some  branch  or  state  bank  to  the  order  of  the  cash- 
ier, who  gave  credit  for  them  to  the  treasurer  of  the  United 
States,  who  then  drew  upon  the  bank  for  whatever  sums  he 
wanted  and  at  whatever  points  he  wanted  them.  The 
advantage  of  such  an  arrangement  is  apparent.  The  gov- 
ernment got  complete  control  of  all  its  funds  at  once,  and  it 
could  command  their  services  immediately  wherever  needed. 
The  treasurer  simply  drew  drafts  upon  the  cashier  of  the 
bank,  designating  the  office  or  state  bank  at  which  payment 
was  required,  and  sent  the  drafts  to  the  offices  where  the 
money  was  to  be  paid,  abstracts  of  these  drafts  being  for- 
warded every  week  to  the  bank,  which  then  placed  the  sum 
on  its  books  to  the  debit  of  the  United  States.1 

It  was  very  soon  discovered,  however,  that  the  agent  state 
banks  abused  their  privileges  as  government  depositories  to 

1 "  1st.  The  transactions  of  the  Treasury  shall  be  conducted  through  the  Cashier 
of  the  Bank  of  the  United  States. 

"  2d.  All  public  money  deposited  in  any  of  the  offices  or  banks  employed  in  lieu 
of  offices  shall  be  entered  to  the  credit  of  the  Bank  of  the  United  States  for  the  use 
of  the  Treasurer  of  the  United  States. 

"  3d.  Corresponding  credits  shall  be  given  to  the  Treasurer  upon  the  books  of 
the  Bank  of  the  United  States,  according  to  the  weekly  statement  of  every  such 
office  or  bank  rendered  to  the  said  bank 

"  4th.  All  drafts  of  the  Treasurer  shall  be  drawn  upon  the  Cashier  of  the  Bank 
of  the  United  States,  designating  the  office  or  bank  at  which  payment  shall  be 
required.  The  drafts,  however,  will  not  be  sent  to  the  Cashier  of  the  United  States 
Bank,  but  weekly  abstracts  of  all  warrants  drawn  by  the  Treasurer  upon  the  several 
offices  and  State  banks  will  be  transmitted  to  the  Cashier  of  the  Bank  of  the  United 
States.  And  all  drafts  paid  by  the  offices  and  State  banks  shall  be  returned,  through 
the  mother  bank,  to  the  Treasury."— Crawford  to  Jones,  April  22, 1817,  ibid.,  pp.  519, 520. 

"The  Bonds  as  they  are  collected,  go  immediately  to  the  Collector,  who  about 
once  a  week,  in  the  large  cities,  after  receiving  the  money  for  debentures,  transfers 
his  funds  to  the  credit  of  the  Treasurer  of  the  United  States."— Biddle  to  N.  Silsbee, 
Dec.  28, 1833,  P.  L.  B.,  Vol.  V,  p.  62. 


460  THE  SECOND  BANK  OP  THE  UNITED  STATES 

secure  profits  at  the  expense  of  the  Bank  of  the  United 
States.1  While  doing  this  they  never  ceased  complaining  of 
the  alleged  unjust  acts  and  oppressions  of  the  national  bank.2 
Consequently,  there  were  endless  irritation  and  constant 
collisions  between  them  and  the  Bank  of  the  United  States, 
and  the  irritation  was  heightened  by  the  necessity  the  bank 
was  under  of  transforming  into  specie  the  western  and  south- 
ern state-bank  notes  received  on  public  account.*  Finally, 
the  directors  were  astounded  by  discovering  that  Secretary 
Crawford  considered  the  institution  legally  responsible  for 
the  safety  of  the  government  deposits  in  the  agent  state 
banks.*  The  bank  could  not,  with  any  regard  to  its  own 
safety,  continue  to  incur  such  responsibility.  It  therefore 
relinquished  all  control  over  state  banks  holding  deposits 
and  demanded  that  a  new  arrangement  should  be  made.5 

Accordingly,  on  the  30th  of  June,  1818,  this  part  of  the 
plan  of  simplifying  the  operations  of  the  treasury  came  to 
an  end.  The  state  banks  holding  government  funds  were 
made  directly  responsible  to  the  secretary,  and  the  moneys 

l  Jones  to  Crawford,  March  12, 1817,  F.,  Vol.  IV,  p.  776. 

J  Crawford  speaks  of  "  the  complaints  of  the  State  banks  employed  as  offices  of 
deposit  that  the  Bank  of  the  United  States  acted  oppressively  and  capriciously 
towards  them,  by  subjecting  them  to  all  the  inconveniences  incident  to  the  relation 
they  held,  and  depriving  them  of  most  of  the  advantages  which  they  had  a  right  to 
expect  from  that  relation." — Ibid.,  p.  262. 

3  Crawford  says :  "As  the  transfers  of  the  pnblic  money  are  made  by  the  Bank 
of  the  United  States,  the  excitement  produced  by  the  demand  for  specie,  or  funds 
that  can  be  remitted,  consequent  upon  such  transfers,  has  been  directed  against 
that  institution.  All  the  evils  which  the  community,  in  particular  parts  of  the 
country,  has  suffered  from  the  sudden  decrease  of  the  currency,  as  well  as  from  its 
depreciation,  have  been  ascribed  to  the  Bank  of  the  United  States,  which,  in  trans- 
ferring the  public  funds,  has  been  a  passive  agent  in  the  hands  of  the  Government." 
—  Report  to  the  House,  Feb.  12,  1820,  ibid.,  Vol.  Ill,  p.  508. 

*  "  The  banks  have  been  selected  by  the  Bank  of  the  United  States,  and  the  corre- 
spondence between  that  institution  and  this  Department  shows  that  the  bank  con- 
siders itself  responsible  for  the  money  deposited  in  the  State  banks  selected  for  that 
purpose." — Crawford  to  Jones,  June  3, 1818,  ibid.,  VoL  IV,  p.  584 ;  same  to  same,  June 
30, 1818,  ibid.,  p.  587. 

6  The  bank  "  hereby  expressly  relinquishing  all  control  over  the  State  banks 
employed  as  banks  of  deposit  and  the  public  money  which  may  be  deposited  in 
them  hereafter."— Jones  to  Crawford,  June  23, 1818,  ibid.,  p.  853. 


THE  BANK  AS  A  GOVERNMENT  AGENCY    461 

held  by  them  were  made  subject  to  the  drafts  of  the  treas- 
urer, and  not  to  those  of  the  cashier  of  the  Bank  of  the 
United  States.1  The  government  kept  up  this  connection 
with  the  state  banks  all  through  the  existence  of  the  bank, 
but  it  was  excessively  annoying,  and  the  Treasury  Department 
would  have  been  glad  to  discontinue  it.  Secretary  Rush, 
in  1826,  complained  of  the  inability  of  the  state  banks  to 
perform  satisfactorily  the  duties  assumed  by  them,  and  de- 
sired that  all  the  government  deposits  should  be  intrusted 
to  the  keeping  of  the  Bank  of  the  United  States.2  At  this 
time  the  number  of  state  banks  employed  as  depositaries  was 
small,  and  Rush  thought  that  if  the  bank  would  establish 
branches  in  Maine,  Alabama,  Michigan,  and  Missouri,  all  the 
public  treasure  could  be  placed  in  its  charge.8  Later  the  bank 
did  establish  branches  at  Portland,  Mobile,  Natchez,  Buffalo, 
and  St.  Louis,  largely  for  the  convenience  of  the  treasury, 
and  at  that  department's  solicitation.  But  the  needs  of  the 
treasury  constantly  increased,  and  the  necessity  of  using 
local  banks  in  states  where  the  Bank  of  the  United  States 
had  no  branch  was  always  present.  Consequently,  when  the 

1  "  The  arrangement  by  •which  the  public  money  deposited  in  the  State  banks  as 
offices  of  deposit  was  subject  to  the  drafts  of  the  Cashier  of  the  Bank  of  the  United 
States,  by  agreement,  expired  on  the  30th  ultimo.    All  sums  deposited  in  such  banks 
subsequent  to  that  time  may  be  entered,  as  heretofore,  to  the  credit  of  the  Bank  of 
the  United  States,  for  the  use  of  the  United  States,  and  shall  be  drawn,  from  time 
to  time,  by  the  Treasury  drafts."— Crawford  to  selected  state  banks,  July  1, 1819, 
ibid.,  p.  588. 

2  "  From  the  want  of  punctuality  that  has  been  manifested  by  some  of  the  State 
banks,  in  regard  to  their  engagements  with  the  Treasury,  and  from  the  risks  to  which 
they  have  been  found  to  be  generally  subject,  it  seems  as  if  it  would  be  ultimately 
necessary  to  dispense  altogether  with  the  agency  of  those  institutions ;  indeed  the 
chief  difficulty  that  presents  itself  to  the  immediate  adoption  of  this  course,  would 
be  removed,  if  there  were  offices  of  the  Bank  of  the  United  States  at  those  points 
at  which  the  public  deposites  in  different  quarters  might,  without  too  great  incon- 
venience, be  concentrated."— Secretary  Bush  to  Biddle,  Jan.  26,  1826,  8.  D,  17,  23d 
Cong.,  2d  Sess.,  p.  254. 

3 "It  is  believed  that  the  establishment  of  these  three  offices  [at  Detroit, 
Mobile,  and  St.  Louis]  and  one  in  Maine,  which  the  bank  is  understood  to  have  long 
had  in  view,  would  remove  the  necessity  of  employing  any  other  than  the  Bank  of 
the  United  States  and  its  offices  as  depositaries  of  the  public  moneys  throughout  the 
United  States."— Ibid.,  p.  255. 


462  THE  SECOND  BANK  OP  THE  UNITED  STATES 

deposits  were  removed  in  October,  1833,  there  were  still 
thirteen  state  banks  which  held  funds  and  made  payments 
for  the  government.1 

The  arrangement  entered  into  in  1817  for  making  trans- 
fers of  government  funds  soon  became  embarrassing  to  the 
bank,  because  the  treasury  was  accustomed  to  call  for  the 
funds  whenever  it  wished  them,  regardless  of  the  places  in 
which  they  were.  Transfers  having  to  be  made  over  vast 
distances,  across  a  country  where  the  means  of  transporta- 
tion were  so  wretched  that  it  took  six  weeks  to  travel  from 
Philadelphia  to  New  Orleans,  it  was  absolutely  impossible 
for  the  bank  to  meet  the  demand  of  the  treasury  without 
being  allowed  time  to  make  the  transfers.  Cashier  Smith 
complained  that  the  government  drew  for  large  sums  with- 
out giving  previous  notice  to  the  institution,  and  that  it  was 
beyond  the  bank's  power  to  meet  these  demands.2  Crawford 
replied  that  the  treasury  kept  its  accounts,  not  with  the 
branches  or  the  agent  banks,  but  with  the  Bank  of  the  United 
States  alone,  which  therefore  must  be  ready  to  pay  the 
public  funds  at  the  points  designated  by  the  treasurer,  no 
matter  where  the  funds  were  collected  and  deposited.3  The 

1  Beport  of  Secretary  Woodbury,  Dec.  12, 1834,  8.  D.  13,  23d  Cong.,  2d  Sess.,  p.  45. 
The  annoyance  caused  the  government  by  this  arrangement  was  considerable,  for  it 
resulted  not  only  in  poorer  service,  but  also  in  actual  loss.    From  1817-34,  inclusive, 
$1,764,235.05  became  unavailable  by  the  failure  of  deposit  state  banks,  and  in  1834 
$920,260.16  were  still  due.— Ibid.,  p.  50. 

2  "  There  is  not  a  sum  sufficient  to  the  credit  of  the  Treasurer  in  this  bank  to 
meet  his  draft  this  day  received  for  eleven  millions  of  dollars.    It  was  expected  that 
when  the  interests  of  the  public  required  an  accumulated  sum  at  any  one  point 
drafts  would  have  been  drawn  in  favor  of  the  Bank  of  the  United  States  on  the 
Cashier,  payable  at  such  offices,  or  banks  employed  in  lieu  of  offices,  from  whence 
the  money  was  intended  to  be  drawn,  which  would  have  enabled  this  bank  to  have 
placed  the  money  at  the  point  desired." — Smith  to  Treasurer  Tucker,  Aug.  13,  1817, 
.F.,  Vol.  IV,  pp.  813, 814. 

3  "  The  Treasurer  keeps  no  account  with  the  offices  and  State  banks  employed 

in  that  character  by  the  United  States  Bank The  drafts  of  the  Treasurer, 

since  the  first  embarrassments  by  which  the  United  States  Bank  was  enveloped  have 
passed  away,  are  made  payable  wherever  the  public  interest  requires,  without  refer- 
ence to  the  existence  of  public  funds  at  such  place,  as  the  bank  is  by  charter  bound 
to  transmit  the  public  funds  whenever  the  Government  requires  them." — Crawford 
to  Smith,  Sept.  25, 1817,  ibid.,  p.  550. 


THE  BANK  AS  A  GOVERNMENT  AGENCY    463 

drafts  of  the  government  became  still  more  embarrassing 
during  the  panic  of  1818-19. 

In  October,  1819,  therefore,  Cheves  transmitted  to  Craw- 
ford the  draft  of  a  new  arrangement  to  date  from  November 
1  of  that  year.  The  time  to  be  allowed  for  transferring  funds 
was  as  follows :  from  and  to  New  Orleans,  no  matter  what  the 
other  office,  four  months ;  from  the  West  to  the  Atlantic  cities, 
and  vice  versa,  four  months;  from  offices  south  of  Wash- 
ington to  those  north,  and  vice  versa,  sixty  days ;  and  from 
offices  south  of  Washington  to  offices  south  of  that  city,  or 
from  offices  north  of  it  to  offices  north,  thirty  days.1  Nor 
was  the  treasury  to  draw  on  an  office  unless  it  had  funds 
deposited  there.  A  change  was  also  made  at  this  time  in  the 
mode  of  keeping  the  accounts  of  the  treasury  with  the  bank. 
Henceforth  the  department  was  to  keep  separate  accounts 
with  the  individual  offices,  instead  of  a  single  account  with  the 
parent  office.2  These  modifications  were  accepted  by  Craw- 

1 "  1.  That  ....  the  bank  shall  pay,  at  the  places  of  receipt,  without  reference 
to  the  notes  received,  (whether  of  the  offices  receiving,  or  others,)  except  in  relation 
to  debentures. 

"  2.  That  the  Treasury,  when  it  desires  to  use  its  funds  otherwise  than  whore 
they  may  be  deposited,  shall  direct  the  bank  to  transfer  to  the  specific  offices  where 
it  shall  want  its  funds,  from  the  specific  office  where  they  may  be  deposited,  and 
that  the  bank  shall  be  bound  to  effect  these  transfers  within  periods  to  be  agreed 
upon,  ....  that  for  the  present,  ....  the  following  periods  be  established : 

"  1.  From  the  western  offices  to  the  Atlantic  offices,  respectively,  and  vice 
versa,  four  months. 

"  2.  From  and  to  New  Orleans,  in  all  cases,  four  months. 

"  3.  From  the  offices  south  to  the  offices  north  of  Washington,  and  vice  versa, 
sixty  days. 

"4.  From  offices  north  of  Washington  to  offices  north  of  Washington,  thirty 
days. 

"  5.  From  offices  south  of  Washington  to  offices  south  of  Washington,  thirty 
days. 

"  3.  That  the  Government  (unless  in  circumstances  which  shall  be  the  subject  of 
special  arrangement)  shall  only  draw  on  offices  to  the  amount  of  its  funds  in  those 
offices,  respectively,  except  the  office  at  Washington,  where  it  shall  draw  at  pleasure, 
as  heretofore. 

"  5.  When,  under  special  understanding,  the  Government  shall  draw  on  the 
bank  or  an  office  not  having  funds  to  meet  the  draft,  it  shall  simultaneously  grant  a 
draft  in  favor  of  the  bank  or  the  office  on  the  bank  or  such  office  where  it  shall  have 
funds  as  the  bank  shall  designate,  to  cover  such  drafts."— Resolutions  of  Sept.  25, 
1819,  sec.  16,  ibid.,  p.  909. 

2  "  At  present  there  is  no  account  between  the  Treasury  and  the  offices,  except 
the  office  at  Washington.  The  bank  at  Philadelphia  has  credit  with  the  offices  for 


464  THE  SECOND  BANK  or  THE  UNITED  STATES 

ford.1  The  treasury  thereafter  gave  notice  of  the  transfers 
that  would  be  needed  by  transmitting  to  the  bank  a  weekly 
list  of  the  drafts  drawn,  and  from  June  26,  1829,  a  daily 
list  of  the  warrants  issued,2  stating  the  sums  which  would  be 
needed  by  the  government,  the  places  at  which  they  would  be 
needed,  and  the  times  when  they  were  to  be  paid.  The 
bank  was  thus  always  prepared  to  make  payments  when  they 
were  called  for,  and  thenceforth  the  monetary  affairs  of  the 
government  were  managed  without  inconvenience  either  to 
the  bank  or  to  the  treasury. 

The  specific  acts  which  the  bank  had  to  perform  as  a 
treasury  agent  were  the  following:  (1)  it  received  and  kept 
the  funds  of  the  government,  from  whatever  source  derived ; 
(2)  it  transferred  the  money  of  the  nation  from  any  part  of 
the  nation  to  any  other  part;  (3)  it  made  disbursements 
from  the  government  funds  to  the  holders  of  the  public 
debt;  and  similarly  (4)  it  paid  almost  all  the  pensioners  of 
the  government.  All  this  it  did  without  compensation. 

The  first  inquiry  which  naturally  arises  is  whether  or  not 
the  bank  was  a  perfectly  safe  depositary.  To  this  inquiry 
only  one  answer  was  ever  given,  and  that  an  affirmative  one. 
Secretary  Woodbury,  a  bitter  opponent  of  the  bank,  in  his 
report  of  February  11,  1841,  admitted  that  the  government 
had  not  lost  a  single  dollar  through  the  agency  of  the  Bank 
of  the  United  States,  while  losses  from  state  banks,  counting 
principal  and  interest,  were  $15,492,000. 3  The  explanation 
of  the  bank's  safety  as  a  public  depositary  is  simple.  It  was 
responsible  for  the  government  funds  to  the  extent  of  its 

the  use  of  the  Treasury,  and  is  debtor  to  the  Treasury  for  the  aggregate  amount ; 
this  mode  of  keeping  the  account  is  rather  a  fiction  than  a  reality.  The  offices  are 
really  debtor,  and  have  the  means  of  paying,  and  with  them,  respectively,  the 
accounts  ought  to  be  kept." — Ibid. 

1  Crawford  to  Cheves,  Oct.  8, 1818,  F.,  Vol.  IV,  p.  644. 

zjaudon  to  Campbell,  Nov.  5,  1833,  H.  R.  313,  23d  Cong.,  1st  Sess.,  p.  24;  and 
Nov.  15, 1833,  ibid.,  p.  27. 

38.  D.  180,  26th  Cong.,  2d  Sess.,  p.  4. 


THE  BANK  AS  A  GOVERNMENT  AGENCY    465 

entire  capital,  and  it  could  be  reached  easily  by  legal  process 
through  the  courts  of  the  United  States  if  the  need  arose. 
Moreover,  the  bank  was  under  the  strict  supervision  of 
the  Treasury  Department,  its  affairs  being  placed  before  the 
secretary  every  week  and  every  month,  and  that  officer  being 
empowered  to  make  a  special  examination  whenever  he 
saw  fit.  Besides  all  this,  either  house  of  Congress  could 
order  an  investigation  at  any  time.  This  state  of  affairs 
reveals  at  once  the  difference  in  the  degree  of  responsibility 
between  the  Bank  of  the  United  States  and  the  state  banks. 
Over  the  latter  the  government  had  no  control ;  they  were 
amenable  to  state  laws,  and  the  strictness  of  these  laws  varied 
with  the  state ;  there  was  seldom  rigid  supervision,  and  fre- 
quently no  supervision  whatever.  Hence  the  government 
incurred  great  risks  in  employing  state  banks,  no  risk  what- 
ever in  employing  the  national  bank. 

Then,  as  now,  most  of  the  revenue  was  received  through 
the  customs-houses.  The  entire  amount  collected  from  cus- 
toms during  the  bank's  custody  of  the  public  funds  was  over 
$358,000,000,  while  the  sum  of  all  the  government  moneys 
which  the  bank  ever  held  was  about  $410,000,000.  The 
sums  received  from  the  sale  of  public  lands  were  next  in 
amount,  being  $35,700,000  for  the  whole  time  that  the  bank 
held  the  public  deposits,  while  the  receipts  from  internal 
revenue,  direct  taxes,  and  miscellaneous  sources  were  meager, 
being  from  1817-33,  inclusive,  only  $11,900,000.' 

Adherents  of  the  bank  were  wont  to  magnify  its  services 
in  making  transfers  for  the  government.2  Its  opponents,  on 
the  other  hand,  belittled  the  claims,  and  asserted  positively 
that  it  possessed  no  special  virtues  in  this  particular.  Polk, 
in  his  minority  report  of  March,  1833,  asserted  that  the 

1  See  the  Report  of  the  Secretary  of  the  Treasury,  1893,  pp.  cxxii,  czziii,  for  the 
government  receipts  during  1817-36. 

2  ADAMS,  Gallatin's  Writings,  Vol.  Ill,  pp.  328,329,345,346;  COLTON,  Works  of 
Clay,  Vol.  V,  p.  615;  Webster's  Works,  Vol.  HI,  pp.  401,  402;  Vol.  IV,  p.  201. 


466   THE  SECOND  BANK  OP  THE  UNITED  STATES 

bank  rendered  no  special  service  in  transferring  government 
funds.1  Secretary  Woodbury,  in  1834,  argued  that  the 
transfers  were  profitable  to  the  bank,2  and  Gouge,  in  a  pam- 
phlet issued  in  1837,  made  an  elaborate  argument  against 
the  bank  as  a  necessary,  or  even  a  convenient,  treasury 
agent.  He  held  that  its  services  in  this  capacity  had  been 
grossly  overrated;  that  at  those  points  where  the  transfers 
incurred  risk  or  expense  the  government  was  compelled  to  be 
its  own  carrier;  and  that  a  private  merchant  occupying  a 
position  similar  to  that  of  the  bank  would  have  made  an 
immense  fortune.3 

In  making  these  criticisms  the  whole  truth  was  some- 
times either  not  told  or  else  obscured.  For  instance,  Wood- 
bury,  while  arguing  that  the  bank  made  few  transfers  for 
the  government,  revealed  in  a  passing  sentence  that  this  had 
been  the  case  only  within  a  few  years,  and  that  earlier  the 
advantages  to  the  government  had  been  considerable.*  Both 
his  opinions  and  those  of  Polk  were  based  entirely  upon  the 
figures  for  1834,  which  seemed  to  show  that  collections  and 
disbursements  were  principally  made  at  the  same  points,  and 
hence  that  few  transfers  were  necessary.  Even  most  of  this 
was  mere  seeming.  Gouge  fell  into  error  by  accepting  these 
figures  and  the  accompanying  argument  in  Woodbury's 
report,  without  noting  his  admission  of  the  bank's  previous 
usefulness.  A  list  of  transfers  for  1832  proves  that  Wood- 
bury's "few  years"  were  not  over  two,  for  in  that  year  they 
were  numerous  and  large.5 

l  H.  R.  121, 22d  Cong.,  2d  Sess.,  p.  42.        23.  D.  13, 23d  Cong.,  2d  Sess.,  pp.  10-12, 54-62. 

3  GOUGE,  An  Inquiry  into  the  Expediency  of  Dispensing  with  Bank  Agency  .... 
in  the  Fiscal  Concerns  of  the  Country,  etc.,  pp.  24,  38. 

*  "  The  benefits,  supposed  to  have  been  derived  by  this  department  from  the 
United  States'  Bank,  from  performing  that  operation,  were,  at  one  time,  consider- 
able." This  had  ceased  to  be  so  "for  some  years  past." — Secretary  Woodbury's 
report,  Dec.  12, 1834,  S.  D,  13,  23d  Cong.,  2d  Sess.,  p.  12. 

5  The  whole  sum  was  $16,100,000.— S.  D.  17, 23d  Cong.,  2d  Sess.,  p.  181.  "  The  aver- 
age from  1815  to  1827  is  28  millions."  The  average  now  is  from  twenty  to  twenty- 
five  millions.— Biddle  to  Gallatin,  Sept.  9, 1830,  P.  L.  S.,Vol.  Ill,  p.  344. 


THE  BANK  AS  A  GOVERNMENT  AGENCY    467 

Yet,  even  admitting  that  Woodbury  and  the  others  were 
absolutely  accurate  in  their  statements,  and  that  the  bank 
made  a  profit  on  the  transfers,  still  the  conclusion  that  the 
transfer  of  the  funds  was  not  a  great  convenience  and  saving 
to  the  government,  would  not  follow.  It  was  not  correct 
to  argue  that,  because  the  bank  could  make  the  transfers 
and  realize  a  profit  in  making  them,  this  could  be  done  by 
any  other  institution,  or  that  the  government  could  itself 
transfer  the  funds  without  expense.  Neither  of  these  things 
was  so.  It  will  be  readily  admitted  that  if  the  government 
wished  to  move  its  funds  without  depositing  them  in  some 
bank,  it  would  have  to  pay  for  the  transfers,  and  there 
would  be  no  compensating  advantage.  As  to  the  state 
banks,  the  national  bank  possessed  at  least  three  very  definite 
advantages  over  them.  Its  notes,  checks,  drafts,  and  bills 
of  exchange  were  willingly  received  everywhere  from  Mon- 
treal to  the  City  of  Mexico.  A  credit  so  extensive  made 
possible  a  system  of  domestic  exchange  by  means  of  which 
the  funds  of  the  government  were  transported  from  place  to 
place,  always  at  a  very  low  rate,  and  frequently  with  a  profit 
to  the  bank.1  In  the  third  place,  all  this  was  made  easier 
and  the  system  of  exchange  rendered  of  the  highest  effi- 
ciency by  the  organization  of  the  bank,  with  its  twenty-five 
branches  scattered  through  the  Union.  Not  one  of  these 
advantages  was  possessed  by  a  state  bank,  and  yet  the  result- 
ing efficiency  and  the  consequent  profit  on  the  exchanges 
could  be  attained  by  no  other  means. 

The  sum  saved  to  the  government  on  transfers  may  be 
calculated  with  some  approximation  to  the  truth.  The  bank 
charged  on  an  average  ^  of  1  per  cent,  for  making  transfers 

i  "The  transfer  of  the  money  of  the  United  States  by  the  Treasury,  from  one  part 

to  another,  would  be  attended  with  great  risk  and  some  expense The  bank  is 

bound  to  draw  the  money  of  the  United  States  from  any  one  part  of  the  Union  to 
any  other,  without  any  allowance  for  loss  of  exchange.  This,  it  is  presumed,  is  a 
considerable  saving  to  the  United  States  in  the  exchange,  and  a  security  against  the 
risk  of  transport  and  fraudulent  agents The  exchange  almost  always  is  in. 


468  THE  SECOND  BANK  OP  THE  UNITED  STATES 

for  private  individuals.  The  transfers  for  the  treasury  from 
1815  to  1827,  inclusive,  averaged  $28,000,000  a  year,  and 
at  £  of  1  per  cent,  the  sum  saved  yearly  would  be  $60,186.56.  * 
For  the  seventeen  years  that  the  bank  was  the  public  deposi- 
tary this  would  give  a  saving  of  $1,023,161.52,  and  this 
amount  is  probably  not  excessive. 

When  the  disbursements  are  examined  they  are  found  to 
fall  under  several  heads :  There  were  payments  made  on  ac- 
count of  the  public  debt,  principal  and  interest ;  of  pensions ; 
of  the  army  and  navy ;  and  of  the  civil  list.  The  bank  incurred 
no  great  expense  in  making  any  of  the  disbursements,  ex- 
cept those  in  connection  with  the  public  debt  and  pensions.2 
An  inquisition  into  the  disbursements  on  account  of  all 
other  subjects  is,  therefore,  unnecessary.  In  respect  to  the 
public  debt  and  pensions,  the  bank  not  only  acted  as  dis- 
burser  for  the  government,  but,  in  accordance  with  the 
terms  of  the  charter,  had  imposed  upon  it  the  duties  of  com- 
missioners of  loans  and  pension  agents.3 

During  the  period  of  the  bank's  possession  of  the  gov- 
ernment deposits  the  sum  paid  in  discharge  of  pensions 
was  $34,424,000.  Not  all  of  this  was  disbursed  by  the 
bank,  since  in  states  where  it  had  neither  a  branch  nor  an 
agency  the  payments  were  made  through  private  agents. 
These  exceptions  were  unimportant,*  however,  and  the  con- 
favor  of  New  Orleans :  The  difference  of  exchange  is  believed  to  be  from  2  to  4,  and 
sometimes  5  per  cent,  which  is  a  saving  to  the  United  States ;  not  a  positive  loss  to 
the  bank,  because  it  may,  and  probably  does  save  itself  by  the  purchase  of  bills  of 
exchange  on  Europe,  which  it  can  sell  in  the  Atlantic  States,  without  loss ;  an  opera- 
tion which  would  be  very  difficult  and  expensive  (and  perhaps  dangerous,  from  bad 
agents)  for  the  Treasury  to  perform." — Report  of  the  Finance  Committee  of  the 
Senate,  May  13, 1828,  S.  D.  195,  20th  Cong.,  1st  Sess.,  p.  3. 

1  Biddle  to  Gallatin,  Sept.  9, 1830,  P.  L.  B.,  Vol.  Ill,  p.  344. 

2  Thus  from  1817  to  1835,  inclusive,  out  of  a  total  expenditure  of  $481,983,000,  the 
amount  devoted  to  the  payment  of  the  public  debt  and  pensions  was  $243,744,000,  or 
more  than  one-half. 

3  Statutes  at  Large,  Vol.  Ill,  pp.  360, 361,  chap,  xxxviii. 

*  Thus  in  1826  the  amount  expended  on  pensions  was  $1,556,000,  out  of  which  the 
bank  disbursed  $1,003,514.50;  in  1827  the  whole  amount  was  $976,000,  out  of  which  the 
bank  disbursed  $926,343.70.  See  Report  of  the  Secretary  of  the  Treasury  for  expend!- 


THE  BANK  AS  A  GOVERNMENT  AGENCY    469 

jecture  that  the  bank  disbursed  $30,000,000  out  of  the  total 
will  not  be  far  astray.  The  sum  saved  to  the  government 
may  be  calculated  on  the  basis  of  2  per  cent.,  that  being 
the  commission  allowed  to  individual  pension  agents.1  The 
whole  amount  saved  would  be,  therefore,  $600,000. 2 

The  sums  paid  on  account  of  the  public  debt  were  large, 
aggregating  $212,202,000  from  1817  to  1835,  inclusive. 
The  expenses  of  disbursing  at  least  $200,000,000  of  this  total 
fell  upon  the  bank.  These  expenses  to  the  government  before 
the  establishment  of  the  bank  had  ranged  from  $26,000  to 
$31,000  a  year,  while  after  its  establishment  they  were  reduced 
to  a  trifle  over  $2,000.s  It  may  be  concluded,  therefore,  that 
the  bank  saved  the  government  from  $500,000  to  $600,000  on 
this  item.4  Adding  this  to  the  saving  on  the  pension  pay- 
ments and  that  on  the  transfers,  the  total  is  at  least  $2,120,000. 

Not  only  did  the  bank  save  the  nation  large  sums  by  act- 
ing as  paymaster  of  pensions  and  the  public  debt,  but  it 
assumed  the  risks  which  the  government  would  otherwise 
have  been  compelled  to  incur.  It  occasionally  suffered  losses 
as  a  result.  Thus  the  president  at  Portsmouth  defrauded 
the  government  of  $20,000,  taking  the  sum  from  the  pension 
funds,  and  the  bank  was  obliged  to  replace  it.5  In  1828  the 

tures  of  the  government,  1893,  pp.  cxxvi,  cxxvii;  for  bank's  disbursements,  Ap- 
pendix B,  report  of  the  Senate  Finance  Committee,  May  13,  1828,  S.  D.  195,  20th 
Cong.,  1st  Sess.,  p.  7. 

1 "  The  rate  of  commissions  allowed  for  paying  pensions,  where  any  are  allowed 
to  agents  or  institutions  other  than  the  Bank  of  the  United  States  and  its  branches, 
is  2  per  cent." — Ibid. 

-"At  this  rate  [i.  e.,2  per  cent.]  the  annual  amount  of  commissions  wonld  bo 
as  follows:  1825,  $21,143.20;  1826,  $20,070.29;  1827,  $18,526.87."— Ibid.  The  sums  paid  in 
pensions  during  these  years  were  less  than  the  annual  average. 

« 1814,  $26,578.01;  1815,  $31,584.51;  1816,  $31,345.21;  1817,  $30,675.80;  1818,  $2,042,30.— 
Appendix  C,  ibid.,  p.  8.  See  the  Report  of  the  Secretary  of  the  Treasury,  1893,  pp.  cxxvi, 
czxvii,  for  the  expenditures  of  the  government  from  1817  to  1837. 

*  In  February,  1829,  President  Biddle  declared  that  the  sum  saved  the  govern- 
ment by  the  bank  was  $50,000  annually  on  payment  of  pensions  and  public  debt.  This 
would  make  the  total  saving  about  $900,000.— S.  D.  92,  20th  Cong.,  2d  Sess.,  p.  6. 

5  "  The  office  at  Portsmouth  had  originally  the  misfortune  to  have  at  its  head  a 
Mr.  Cutts,  who  ended  by  defrauding  the  United  States  of  upwards  of  $20,000  of  the 
pension  fund,  which  the  bank  was  obliged  to  replace." — Biddle  to  Ingham,  July  18, 
1829,  H.  B.  460, 22d  Cong.,  1st  Sess.,  p.  442. 


470  THE  SECOND  BANK  OP  THE  UNITED  STATES 

institution  lost  $3,000  by  a  fraud  committed  on  it  in  pay- 
ment of  part  of  the  funded  debt ;  in  1829  it  was  being  sued 
for  $5,000  which  had  been  lost  through  the  failure  of  its 
agents.1  Biddle  mentions  a  case  in  which  the  bank  suffered 
by  paying  out  pension  moneys  without  having  complied  with 
all  the  formalities  of  the  Treasury  Department,2  and  after  the 
expiration  of  the  charter  the  bank  was  sued  for  $24,907, 
which  had  been  retained  by  presidents  at  the  branches.3 
The  duties  of  commissioners  of  loans  were  evidently  hazard- 
ous, and  that  they  were  onerous  is  known  from  the  objec- 
tions made  by  the  state  banks  to  performing  them/ 

When  the  charter  was  framed  there  was  a  general  expec- 
tation that  the  bank  would  enhance  the  credit  of  the  state 
by  absorbing  into  its  capital  much  of  the  public  stock.  The 
government,  moreover,  was  given  the  further  advantage  of 
redeeming  this  stock  at  any  time  at  its  valuation  when  sub- 
scribed, no  matter  what  the  market  quotations.  The  expec- 
tations were  realized.  Almost  three-fifths  of  the  bank's 
capital  subscribed  by  individuals  was  in  stock,  to  which  was 
added  the  government's  subscription  of  $7,000,000  at  5  per 
cent.  Thus  $22,386,000  out  of  a  total  of  $35,000,000  con- 
sisted of  government  securities,  and  almost  one-fifth  of  the 
entire  public  debt  was  absorbed  into  the  bank's  capital.5 

1  "The  bank  lost  $3,000  by  a  fraud  committed  on  it  the  last  year,  in  paying  the 
debt,  or  interest  thereon,  and  are  prosecuted  for  another  to  the  amount  of  $5,000. 
The  parties  who  had  fraudulently  received  the  money,  have  failed,  and  the  loss  is 
to  the  bank,  which  would  have  been  to  the  Government,  if  the  Commissioners  of 
Loans,  (as  formerly)  had  transacted  that  service." — S.  D.  92,  20th  Cong.,  2d  Sess.,  p. 
6,  Feb.  20, 1829. 

2  Biddle  to  Cass,  Jan.  23, 1834,  8.  D.  71, 23d  Cong.,  1st  Sess.,  p.  15, 

3  $24,907 .25  had  been  retained  by  the  presidents  of  the  branches  at  New  York, 
Richmond,  and  Cincinnati,  to  reimburse  them  for  duties  performed  as  pension  agents. 
Both  the  bank  and  these  officers  were  sued. —  Report  of  Secretary  Ewing,  June  14, 
1841,  fif.  D.  22,  27th  Cong.,  1st  Sess.,  pp.  2,  3. 

*  President  Fleming,  Mechanics'  Bank,  New  York  city,  to  War  Department, 
Jan.  27,  1834,  8.  D.  71,  23d  Cong.,  1st  Sess.,  pp.  37,  38;  and  President  Schott,  Girard 
Bank,  Philadelphia,  Jan.  22, 1834,  ibid.,  p.  39. 

5  The  whole  nominal  debt  on  Jan.  1,1816,  was  $127,334,933,  and  on  Jan.  1, 1817, 
$123,491,965.  The  bank  held  $22,386,964.93.  For  the  figures  in  regard  to  the  bank's 
subscriptions  see  F.,  Vol.  Ill,  p.  269. 


THE  BANK  AS  A  GOVERNMENT  AGENCY    471 

This  stock  rapidly  appreciated,  and  hereupon  the  government 
took  advantage  of  its  right  to  purchase  the  stock  at  the  sub- 
scription price,  and  in  1817  redeemed  almost  all  held  by  the 
bank,  excepting  its  own  stock  paid  for  bank  shares.1  The 
gain  to  the  government  cannot  be  calculated,  but  it  was  con- 
siderable.2 

The  government  enjoyed  the  further  advantage  of  being 
able  through  the  bank  to  procure  loans  at  the  best  possible 
terms.  A  loan  of  $2,000,000  at  6  per  cent,  was  made  in 
1820; 8  another  of  $4,000,000  at  5  per  cent,  in  1821 ;  *  a  third 
of  $5,000,000  at  4£  per  cent,  in  1824  ;5  and  a  fourth  of 
$5,000,000  at  4£  per  cent,  in  1825.6  The  bank's  greatest 
usefulness  in  this  direction  was  never  proved,  since  its  exist- 
ence was  passed  entirely  in  time  of  peace.  A  war  would  have 
thoroughly  tested  its  efficiency,  and  it  is  probably  one  of 
the  misfortunes  of  this  country  that  no  Bank  of  the  United 
States  existed  at  the  outbreak  of  the  Civil  War. 

In  addition  to  securing  long  loans,  the  government  was 
always  certain  of  being  accommodated  temporarily  by  the  bank. 
The  first  corporate  act  of  the  Bank  of  the  United  States  was  a 
loan  of  $500,000  to  the  government  to  pay  running  expenses.7 
In  the  first  quarter  of  1831  the  treasury  account  was  over- 
drawn $1,044,539,  and  in  the  fourth  quarter  of  1824,  $518,- 
910.8  In  1832  President  Biddle  loaned  the  secretary  of  war 

),000  without  charging  interest.     These  were  matters  of 


'Crawford  to  Jones,  May  8,  1817,  F.,  Vol.  IV,  pp.  525,  526.  The  government 
redeemed  $20,886,000  of  the  public  debt  in  1817.  Of  this  amount  over  $13,000,000  were 
purchased  from  the  Bank  of  the  United  States.— Ibid.,  Vol.  Ill,  p.  228. 

2  Biddle  gave  as  an  instance  the  3  per  cents.  Of  these  there  were  subscribed  to 
the  bank's  capital  $1,556,156.04  at  65  on  the  100,  worth  at  par  $2,934,086.23.  The  govern- 
ment got  this  at  65,  though  it  paid  dollar  for  dollar  on  the  rest  of  the  3  per  cents. 
Profit,  $l,397,930.19.-To  L.  Williams,  Feb.  12, 1833,  P.  L.  B.,  Vol.  V,  pp.  320,  321. 

SNILES,  Vol.  XVIII,  p.  314;  Crawford  to  Cheves,  June  22, 1820,  F.,  Vol.  IV,  p.  665. 

*  Cashier  Wilson  to  Crawford,  April  11,1821,  ibid.,  p.  952. 

5  Ibid.,  Vol.  V,  p.  180.  6  H.  R.  460,  22d  Cong.,  1st  Sess.,  p.  335. 

7  Smith  to  Crawford,  Jan.  4, 1817,  F.,  Vol.  IV,  p.  764. 

8  Report  of  the  treasurer,  Jan.  12, 1829,  8.  D.  44,  20th  Cong.,  2d  Sess.,  p.  2. 


472  THE  SECOND  BANK  OP  THE  UNITED  STATES 

no  great  moment,  but  they  show  how  convenient  the  bank 
was  to  the  government. 

The  country  as  a  whole  derived  direct  pecuniary  advan- 
tages from  the  bank.  It  is  well  known  that  under  the  present 
system  large  payments  on  account  of  the  public  debt  are  apt 
to  embarrass  commerce  by  throwing  on  the  community 
immense  sums  of  money  for  which  there  is  no  demand,  while 
at  other  times  the  treasury  has  locked  up  in  its  vaults  enor- 
mous sums  which  ought  to  be  in  circulation.  Inevitable  and 
severe  disturbances  in  trade  result.  During  the  existence  of 
the  Bank  of  the  United  States  these  disturbances  were,  for 
the  most  part,  avoided.  The  government  never  had  its  sur- 
plus funds  locked  up,  because  the  bank  employed  them  in 
making  loans.  The  bank  also  avoided  the  embarrassments 
occasioned  by  throwing  on  the  market  at  a  single  instant  huge 
quantities  of  money  in  payment  of  the  public  debt,  by  mak- 
ing the  payments  gradually.  In  the  same  way  it  avoided  the 
pressure  consequent  upon  a  sudden  large  demand  upon  the 
money  market  for  funds  to  be  used  in  paying  the  debt.  It 
was  the  frequent  boast  of  President  Biddle  that  these  evils 
always  were  averted  by  the  bank's  good  management,  and  the 
secretaries  of  the  treasury  at  that  day  admitted  that  this  was 
so.1  The  bank  early  received  notification  of  the  debt  to  be 

i  See  the  subject  treated  at  length  in  Secretary  Rush's  report,  Dec.  9, 1828,  S.  D. 
7,  20th  Cong.,  2d  Sess.,  pp.  10, 11. 

"  To  prepare  for  this  payment  by  accumulating  funds,  would  require  that  the 
Bank  should  curtail  its  discounts,  which  would  oblige  the  State  Banks  to  do  the 
same  thing,  so  that  a  scarcity  of  money  would  be  produced,  perhaps  an  extreme 
pressure,  until  the  first  day  of  July,  when  an  immense  amount  of  money  would  be 
thrown  into  the  market  to  seek  investment,  causing  as  sudden  a  rise  in  the  funds  as 
there  had  been  a  previous  depression.  To  avoid  these  fluctuations  the  Bank  has 
said  to  the  fund  holders  instead  of  waiting  for  the  last  moment,  when  there  will  be  a 
great  press  for  investment,  look  about  you  and  wherever  you  find  an  object  of  invest- 
ment, bring  your  stock  to  the  Bank ;  and  although  the  Bank  cannot  purchase  the 
stock,  it  will  lend  the  amount  on  your  note  payable  on  the  1st  of  July,  secured  collat- 
erally by  a  pledge  of  the  certificate,  and  it  will  lend  it  to  you  at  5  per  cent.,  as  it  only 
in  fact  cashing  the  drafts  of  the  Government  on  the  Bank. 

"  This  is  a  great  facility  to  the  fund  holders,  and  they  availed  themselves  of  it 
to  a  considerable  extent,  so  that  on  the  1st  of  July,  the  several  Branches  were  dis- 
counting on  the  stock,  which  was  thus  melting  away,  till  on  the  day  of  payment,  the 


THE  BANK  AS  A  GOVEBNMENT  AGENCY        473 

discharged,  and  at  once  began  discounting  on  the  stocks  to 
be  paid  off,  holding  them  until  the  time  of  redemption  came. 
In  this  way  the  holders  got  a  bank  discount  for  their  stock, 
one  loan  replacing  another.  Hence,  when  the  government 
ordered  the  payment  to  be  made,  the  bank  had  already  pro- 
cured most  of  the  stock.  There  was  then  merely  a  change 
of  credits  on  the  books  of  the  bank,  the  government  getting 
the  stock,  and  the  bank  getting  ownership  of  a  part  of  the 
public  deposits  which  before  were  in  its  possession.  It  is 
true,  however,  that  these  gradual  payments  were  not  always 
possible. 

The  objection  is  sometimes  urged  that  if  the  government 
funds  were  intrusted  to  banks,  difficulty  might  be  found  in 
securing  them  promptly  when  they  were  wanted.  This  objec- 
tion is  valid,  and  necessarily  must  be  where  banks  are  permit- 
ted to  use  the  funds  of  the  government  with  no  stipulation  in 
favor  of  holding  certain  sums  subject  to  order.  The  diffi- 
culty would  almost  certainly  occur  in  times  of  crises,  and 
it  did  occur  in  the  case  of  the  Bank  of  the  United  States. 
Thus,  as  a  consequence  of  the  panic  of  1819,  the  bank  was 
forced  to  ask  the  government  to  postpone  the  payment  of  the 
Louisiana  stock  to  the  amount  of  $2,000,000,  the  bank  pay- 
ing the  interest  on  the  sum.1  The  case  of  the  3  per  cents,  in 
1832  was  of  a  similar  character.  It  may  be  concluded,  then, 
that  there  was  inconvenience  to  the  government  occasionally 
under  the  Bank  of  the  United  States,  but  such  inconveni- 

Bank  was  relieved  from  the  heaviest  pressure,  and  was  enabled  to  continue  its  accom- 
modations to  the  community  undiminished  up  to  the  very  day  of  payment.  This  is 
one  of  the  most  beautiful  of  our  operations,  enabling  the  Bank  to  go  over  a  pay  day 
of  six  or  seven  millions  of  dollars  without  the  slightest  change  in  its  daily  business 
or  the  least  shock  to  the  business  of  the  country." — Biddle  to  F.  Hopkinson,  Nov.  2, 
1830,  P.  L.  B.,  Vol.  Ill,  pp.  378,  379. 

"  It  has  thus  become  part  of  the  settled  policy  of  the  bank,  at  the  approach  of 
any  large  payment,  to  begin  its  preparations  for  a  long  period  in  advance,  so  as  to 
collect  its  means  gradually,  and  to  distribute  its  disbursements  over  as  wide  a  space 
as  possible."— Beport  of  the  Committee  of  Exchange,  H.  R.  121,  22d  Cong.,  2d  Sess., 
p.  161. 

i  Crawford  to  Gallatin,  April  26, 1819,  ADAMS,  Gallatin'*  Writings,  Vol.  II,  p.  98. 


474  THE  SECOND  BANK  OF  THE  UNITED  STATES 

ences  were  as  near  a  minimum  as  could  justly  be  expected. 
There  is  no  system  which  will  completely  meet  the  case. 

The  direct  profit  which  accrued  to  the  United  States 
through  the  connection  with  the  bank  consisted  of  the  bonus 
of  $1,500,000,  then  of  the  excess  of  dividends  from  the  bank's 
profits  over  the  interest  paid  on  the  government's  stock  note, 
and,  thirdly,  of  the  advance  in  the  price  of  this  stock  when  the 
bank  settled  with  the  government.  The  total  of  these  sums 
was  $6,093, 167.07.1  To  this  must  be  added  at  least  $2,100,- 
000  more,  being  the  amount  saved  by  the  bank's  perform- 
ance of  the  duties  of  commissioner  of  loans  and  pension 
agent  and  its  transfers  of  public  funds.  The  whole  profit, 
therefore,  was  something  like  $8,193,000.  This  is  a  definite 
and  calculable  sum.  In  the  nature  of  things,  the  greater 
benefit  was  of  an  intangible  kind,  but  none  the  less  real. 
An  appreciation  in  the  public  securities  had  a  money  value, 
even  though  it  could  not  be  measured,  and  so  had  the 
insurance  of  the  public  funds  which  the  bank's  custody 
furnished. 

The  value  today  of  a  bank  performing  the  same  duties 
for  the  government  would  be  far  in  excess  of  the  value  of 
the  old  bank.  The  charges  for  the  large  government  trans- 
fers, the  expenses  of  the  independent  treasury,  of  the  gov- 
ernment agency  of  the  national  banking  system,  of  the 

1  CREDIT 

Bonus $  1,500,000.00 

Dividends  paid  by  bank 7,118,416.29 

Proceeds  of  stock  sold  and  other  moneys  paid  by 

the  bank  to  the  United  States         ....  9,424,750.78 


Total $18,043,167.07 

DEBIT 

Five  per  cent,  stock $  7,000,000.00 

Interest  paid  on  this  stock 4,950,000.00 

Total $11,950,000.00 

Profit  of  government $6,093,167.07 

—  Report  of  Comptroller  Knoz,  1876,  p.  xiii.     See  also  his  History  of  Banking  in 
the  United  States,  p.  79. 


THE  BANK  AS  A  GOVERNMENT  AGENCY    475 

greenback  issues,  of  treasury  notes,  the  losses  by  fire,  by 
theft,  by  the  bad  faith  of  public  servants  —  would  all  vanish. 
To  the  business  community  and  the  community  at  large 
such  a  bank  would  be  more  valuable  still. 

The  advantages  were  not  all  on  one  side.  The  Bank  of 
the  United  States  certainly  enjoyed  an  equivalent.  But 
that  equivalent  cost  the  country  nothing,  and  the  advantages 
bestowing  it  could  not  have  been  made  profitable  except  as 
granted  to  some  individual  or  corporation.  What  the  govern- 
ment received  from  the  bank  was  pure  gain,  what  it  gave  to 
the  bank  was  no  loss.  The  great  benefit  of  the  connection 
to  the  bank  consisted  in  its  right  to  use  the  public  deposits. 
The  amount  of  these,  as  already  stated,  must  have  been 
somewhere  near  $410,000,000  for  the  whole  time  that  the 
bank  held  them.  The  bank's  profits  on  this  sum  can  be 
calculated  only  by  finding  a  monthly  or  quarterly  average  of 
the  amounts  in  its  vaults.  Such  an  average  was  worked  out 
by  Secretary  Taney  for  every  month  in  the  year  from  1819 
to  1833,  inclusive,  and  was  given  as  $6,717,253.'  It  is  cer- 
tainly fair  to  compute  the  bank's  profits  on  this  sum  as  6 
per  cent,  for  the  whole  time  that  it  was  the  government's 
depositary.  Employing  this  computation,  it  is  seen  that  the 
bank  was  the  gainer  to  the  extent  of  $403,035.18  each  year 
from  1818  to  1834— a  total  of  $6,448,562.28.  From  this 
calculation  are  omitted  the  years  1817  and  1834^35.  For 
1817  accurate  figures  are  not  obtainable;  for  1834-35  the 
monthly  average  of  United  States  funds  held  was  $1,570,000, 
which  sum  for  two  years  at  6  per  cent,  would  yield  $188,400. 
The  bank's  entire  profits,  therefore,  from  this  item  alone  can 
be  set  down  at  not  less  than  $6,636,962.28. 

As 'in  the  case  of  the  government,  so  in  that  of  the  bank, 
there  were  enormous  advantages  which  could  not  be  meas- 
ured in  terms  of  money.  The  monopoly  of  national  banking 

1  S.  D.  16,  23d  Cong.,  1st  Sess.,  pp.  4,  5. 


476  THE  SECOND  BANK  OP  THE  UNITED  STATES 

was  the  principal  of  these;  the  partial  legal -tender  quality 
of  its  notes  was  another;  the  advantage  over  the  state  banks 
secured  by  the  possession  of  the  government  deposits  was  a 
third. 

Up  to  the  period  of  the  Bank  War,  the  connection  be- 
tween the  bank  and  the  government  was  an  immense  benefit 
to  both,  but  particularly  to  the  government.  But  having 
stated  this  conclusion,  there  is  a  corollary  which  is  just  as 
inevitable.  With  the  growth  of  the  Union,  with  the  increase 
of  national  wealth  and  of  population,  the  bank  would  have 
been  progressively  useful.  From  this  point  of  view,  it  becomes 
obvious  that  Jackson  and  his  supporters  committed  an  offense 
against  the  nation  when  they  destroyed  the  bank.  The 
magnitude  and  enormity  of  that  offense  can  only  be  faintly 
realized,  but  one  is  certainly  justified  in  saying  that  few 
greater  enormities  are  chargeable  to  politicians  than  the 
destruction  of  the  Bank  of  the  United  States.  It  was  the 
overthrow  of  a  machine  capable  of  incalculable  service  to 
this  country  —  a  service  which  can  be  rendered  by  no  bank 
not  similarly  organized.  Would  it  not  be  better  for  the 
nation  if  it  could  command  that  service  today  ?  Why  should 
it  be  almost  unanimously  admitted  that  a  bank  of  this  type 
is  of  paramount  importance  to  the  finances  and  commerce  of 
England,  France,  Germany,  Austria,  Russia,  and  yet  denied 
that  a  similar  bank  would  be  of  equal  value  to  the  United 
States?  No  answer  to  this  question  can  be  found  in  our 
political  organization,  none  in  the  nature  of  American  insti- 
tutions, none  in  the  history  of  our  country,  none  in  the 
nature  of  men  as  citizens  of  a  republic,  none  in  such  a  bank's 
political  power;  for  the  bank  possessed  no  political  power. 
In  truth,  there  is  no  answer. 

If,  finally,  it  is  necessary  to  acknowledge,  in  the  words  of 
Daniel  Webster,  that  this  form  of  a  bank  for  the  United 
States  is  an  "obsolete  idea,"  it  ought,  at  least,  to  be  so  much 


THE  BANK  AS  A  GOVERNMENT  AGENCY    477 

the  easier  to  understand  and  to  admit  the  services  which 
such  an  institution  once  performed  at  so  great  a  profit  to 
the  people;  it  ought  to  be  easy  to  give  the  due  meed  of 
praise,  and  no  more  than  the  due  measure  of  blame.  When 
this  is  done,  it  will  have  to  be  acknowledged  that  the  old 
bank,  in  its  services  to  the  government,  was  far  superior  to 
any  other  banking  system  known  in  this  country. 


APPENDICES 


APPENDIX  I 

AN  ACT  to  incorporate  the  subscribers  to  the  Bank  of  the  United 
States. 

Be  it  enacted,  &c.,  That  a  bank  of  the  United  States  of  America 
shall  be  established,  with  a  capital  of  thirty- five  millions  of  dollars, 
divided  into  three  hundred  and  fifty  thousand  shares,  of  one  hundred 
dollars  each  share.  Seventy  thousand  shares,  amounting  to  the  sum  of 
seven  millions  of  dollars,  part  of  the  capital  of  the  said  bank,  shall  be 
subscribed  and  paid  for  by  the  United  States,  in  the  manner  herein- 
after specified;  and  two  hundred  and  eighty  thousand  shares,  amount- 
ing to  the  sum  of  twenty-eight  millions  of  dollars,  shall  be  subscribed 
and  paid  for  by  individuals,  companies,  or  corporations,  in  the  manner 
hereinafter  specified. 

[SEC.  2  specifies  the  times,  places,  and  mode  of  receiving  subscrip- 
tions to  the  capital  stock.] 

SEC.  3.  And  be  it  further  enacted,  That  it  shall  be  lawful  for  any 
individual,  company,  corporation,  or  State,  ....  to  subscribe  for  any 
number  of  shares  of  the  capital  of  the  said  bank,  not  exceeding  three 
thousand  shares,  and  the  sums  so  subscribed  shall  be  payable,  and 
paid,  in  the  manner  following:  that  is  to  say,  seven  millions  of  dol- 
lars thereof  in  gold  or  silver  coin  of  the  United  States,  or  in  gold  coin 
of  Spain,  or  the  dominions  of  Spain,  ....  or  in  other  foreign  gold  or 
silver  coin  ....  and  twenty-one  millions  of  dollars  thereof  in  like  gold 
or  silver  coin,  or  in  the  funded  debt  of  the  United  States  contracted  at 
the  time  of  the  subscriptions  respectively.  [The  section  then  specifies 
what  stocks  may  be  subscribed,  and  at  what  rates.]  And  the  payments 
of  the  said  subscriptions  shall  be  made  and  completed  by  the  subscrib- 
ers, respectively,  at  the  times  and  in  the  manner  following:  that  is  to 
say,  at  the  time  of  subscribing  there  shall  be  paid  five  dollars  on  each 
share,  in  gold  or  silver  coin  as  aforesaid,  and  twenty -five  dollars  more  in 
coin  as  aforesaid,  or  in  funded  debt  as  aforesaid;  at  the  expiration  of  six 
calendar  months  after  the  time  of  subscribing,  there  shall  be  paid  the 
further  sum  of  ten  dollars  on  each  share,  in  gold  or  silver  coin  as  afore- 
said, and  twenty-five  dollars  more  in  coin  as  aforesaid,  or  in  funded  debt 
as  aforesaid;  at  the  expiration  of  twelve  calendar  months  from  the  time 
of  subscribing,  there  shall  be  paid  the  further  sum  of  ten  dollars,  on 

479 


480  THE  SECOND  BANK  OF  THE  UNITED  STATES 

each  share,  in  gold  or  silver  coin  as  aforesaid,  and  twenty -five  dollars 
more  in  coin  as  aforesaid,  or  in  funded  debt  as  aforesaid. 

[SEC.  4  regulates  the  manner  in  which  the  subscriptions  shall  be 
transferred  to  the  "  President  directors  and  company  of  the  Bank  of 
the  United  States,"  and  provides  that  reasonable  compensation  shall  be 
paid  the  "  commissioners  appointed  to  superintend  the  subscriptions."] 

SEC.  5.  And  be  it  further  enacted,  That  it  shall  be  lawful  for  the 
United  States  to  pay  and  redeem  the  funded  debt  subscribed  to  the 
capital  of  the  said  bank,  at  the  rates  aforesaid,1  in  such  sums  and  at 
such  times,  as  shall  be  deemed  expedient,  anything  in  any  act  or  acts  of 
Congress  to  the  contrary  thereof  notwithstanding.  And  it  shall  also  be 
lawful  for  the  president,  directors,  and  company,  of  the  said  bank,  to 
sell  and  transfer  for  gold  and  silver  coin,  or  bullion,  the  funded  debt 
subscribed  to  the  capital  of  the  said  bank  as  aforesaid:  Provided 
always,  That  they  shall  not  sell  more  thereof  than  the  sum  of  two  mil- 
lions of  dollars  in  any  one  year;  nor  sell  any  part  thereof  at  any  time 
within  the  United  States,  without  previously  giving  notice  of  their 
intention  to  the  Secretary  of  the  Treasury,  and  offering  the  same  to  the 
United  States  for  the  period  of  fifteen  days,  at  least,  at  the  current 
price,  not  exceeding  the  rates  aforesaid. 

SEC.  6.  And  be  it  further  enacted,  That,  at  the  opening  of  subscrip- 
tion to  the  capital  stock  of  the  said  bank,  the  Secretary  of  the  Treasury 
shall  subscribe,  or  cause  to  be  subscribed,  on  behalf  of  the  United 
States,  the  said  number  of  seventy  thousand  shares,  amounting  to 
seven  millions  of  dollars  as  aforesaid,  to  be  paid  in  gold  or  silver  coin, 
or  in  stock  of  the  United  States,  bearing  interest  at  the  rate  of  five  per 
centum  per  annum;  ....  and  the  principal  of  the  said  stock  shall  be 
redeemable  in  any  sums,  and  at  any  periods,  which  the  Government 

shall  deem  fit which  said  stock  it  shall  be  lawful  for  the  said 

president,  directors,  and  company,  to  sell  and  transfer  for  gold  and 
silver  coin  or  bullion  at  their  discretion;  Provided,  They  shall  not  sell 
more  than  two  millions  of  dollars  thereof  in  any  one  year. 

SEC.  7.  And  be  it  further  enacted,  That  the  subscribers  to  the 
said  Bank  of  the  United  States  of  America,  their  successors  and 
assigns,  shall  be,  and  are  hereby,  created  a  corporation  and  body  poli- 
tic, by  the  name  and  style  of  "The  president,  directors,  and  company, 
of  the  Bank  of  the  United  States,"  and  shall  so  continue  until  the  third 
day  of  March,  in  the  year  one  thousand  eight  hundred  and  thirty-six, 
and  by  that  name  shall  be,  and  are  hereby,  made  able  and  capable,  in 
law,  to  have,  purchase,  receive,  possess,  enjoy,  and  retain,  to  them  and 
their  successors,  lands,  rents,  tenements,  hereditaments,  goods,  chattels, 
and  effects,  of  whatsoever  kind,  nature,  and  quality,  to  an  amount  not 
exceeding,  in  the  whole,  fifty-five  millions  of  dollars,  including  the 

i  The  rates  at  which  the  stock  was  subscribed. 


APPENDICES  481 


amount  of  the  capital  stock  aforesaid;  and  the  same  to  sell,  grant, 
demise,  alien  or  dispose  of;  to  sue  and  be  sued,  plead  and  be  impleaded, 
answer  and  be  answered,  defend  and  be  defended,  in  all  State  courts 
having  competent  jurisdiction,  and  in  any  circuit  court  of  the  United 
States:  and  also  to  make,  have,  and  use,  a  common  seal,  and  the  same 
to  break,  alter,  and  renew,  at  their  pleasure:  and  also  to  ordain,  estab- 
lish, and  put  in  execution,  such  by-laws,  and  ordinances,  and  regula- 
tions, as  they  shall  deem  necessary  and  convenient  for  the  government 
of  the  said  corporation,  not  being  contrary  to  the  constitution  thereof, 
or  to  the  laws  of  the  United  States;  and  generally  to  do  and  execute  all 
and  singular  the  acts,  matters,  and  things,  which  to  them  it  shall  or 
may  appertain  to  do;  subject,  nevertheless,  to  the  rules,  regulations, 
restrictions,  limitations,  and  provisions,  hereinafter  prescribed  and 
declared. 

SEC.  8.  And  be  it  further  enacted,  That,  for  the  management  of  the 
affairs  of  the  said  corporation,  there  shall  be  twenty-five  directors,  five 
of  whom,  being  stockholders,  shall  be  annually  appointed  by  the  Presi- 
dent of  the  United  States,  by  and  with  the  advice  and  consent  of  the 
Senate,  not  more  than  three  of  whom  shall  be  residents  of  any  one 
State;  and  twenty  of  whom  shall  be  annually  elected  at  the  banking- 
house  in  the  city  of  Philadelphia,  on  the  first  Monday  of  January,  in 
each  year,  by  the  qualified  stockholders  of  the  capital  of  the  said  bank 
other  than  the  United  States,  and  by  a  plurality  of  votes  then  and  there 
actually  given,  according  to  the  scale  of  voting  hereinafter  to  be  pre- 
scribed: Provided  always,  That  no  person,  being  a  director  in  the 
Bank  of  the  United  States,  or  any  of  its  branches,  shall  be  a  director  of 
any  other  bank;  and  should  any  such  director  act  as  a  director  in  any 
other  bank,  it  shall  forthwith  vacate  his  appointment  in  the  direction 
of  the  Bank  of  the  United  States.  And  the  directors,  so  duly  appointed 
and  elected,  shall  be  capable  of  serving,  by  virtue  of  such  appointment 
and  choice,  from  the  first  Monday  in  the  month  of  January  of  each 
year,  until  the  end  and  expiration  of  the  first  Monday  in  the  month  of 
January  of  the  next  year  ensuing  the  time  of  each  annual  election  to  be 
held  by  the  stockholders  as  aforesaid.  And  the  board  of  directors, 
annually,  at  the  first  meeting  after  their  election  in  each  and  every 
year,  shall  proceed  to  elect  one  of  the  directors  to  be  president  of  the 
corporation,  who  shall  hold  the  said  office  during  the  same  period  for 
which  the  directors  are  appointed  and  elected  as  aforesaid:  [The  sec- 
tion then  provides  for  the  election  of  the  first  president  and  directors; 
and  that  the  corporation  shall  not  be  dissolved  if  an  appointment  for 
president  or  an  election  for  directors  does  not  take]  effect  on  any  day 
when,  in  pursuance  of  this  act,  they  ought  to  take  effect,  ....  but  it 
shall  be  lawful  at  any  other  time  to  make  such  appointments,  and  to 
hold  such  elections,  (as  the  case  may  be,)  and  the  manner  of  holding 


482  THE  SECOND  BANK  OP  THE  UNITED  STATES 

the  elections  shall  be  regulated  by  the  by-laws  and  ordinances  of  the 
said  corporation:  and  until  such  appointments  or  elections  be  made, 
the  directors  and  president  of  the  said  bank,  for  the  time  being,  shall 
continue  in  office:  [that  in  case  of  a  vacancy  in  the  presidency,  the 
directors  shall  "  elect  another  president,"  and  in  case  of  vacancies  in  the 
directorate,  other  directors  shall  be  appointed  either  by  the  President 
of  the  United  States  in  case  of  government  directors  or  by  the  stock- 
holders in  case  of  private  directors]. 

SEC.  9.  And  be  it  further  enacted,  That  as  soon  as  the  sum  of  eight 
millions  four  hundred  thousand  dollars  in  gold  and  silver  coin,  and  in 
the  public  debt,  shall  have  been  actually  received  on  account  of  the 
subscriptions  to  the  capital  of  the  said  bank  (exclusively  of  the  sub- 
scription aforesaid,  on  the  part  of  the  United  States)  [the  first  directors 
shall  be  elected,  and  the  president  of  the  bank  appointed  by  them]. 

SEX;.  10.  And  be  it  further  enacted,  That  the  directors,  for  the  time 
being,  shall  have  power  to  appoint  such  officers,  clerks,  and  servants, 
under  them,  as  shall  be  necessary  for  executing  the  business  of  the  said 
corporation,  and  to  allow  them  such  compensation  for  their  services, 
respectively,  as  shall  be  reasonable ;  and  shall  be  capable  of  exercising 
such  other  powers  and  authorities  for  the  well  governing  and  ordering 
of  the  officers  of  the  said  corporation  as  shall  be  prescribed,  fixed,  and 
determined,  by  the  laws,  regulations,  and  ordinances,  of  the  same. 

SEC.  11.  And  be  it  further  enacted,  That  the  following  rules, 
restrictions,  limitations,  and  provisions,  shall  form  and  be  fundamental 
articles  of  the  constitution  of  the  said  corporation,  to  wit : 

1.  The  number  of  votes  to  which  the  stockholders  shall  be  entitled, 
in  voting  for  directors,  shall  be  according  to  the  number  of  shares  he, 
she,  or  they,  respectively,  shall  hold,  in  the  proportions  following,  that 
is  to  say,  for  one  share  and  not  more  than  two  shares,  one  vote ;  for 
every  two  shares  above  two,  and  not  exceeding  ten,  one  vote ;  for  every 
four  shares  above  ten,  and  not  exceeding  thirty,  one  vote  ;  for  every  six 
shares  above  thirty,  and  not  exceeding  sixty,  one  vote  ;  for -every  eight 
shares  above  sixty,  and  not  exceeding  one  hundred,  one  vote  ;  and  for 
every  ten  shares  above  one  hundred,  one  vote ;  but  no  person,  copartner- 
ship, or  body  politic,  shall  be  entitled  to  a  greater  number  than  thirty 
votes ;  and  after  the  first  election,  no  share  or  shares  shall  confer  a 
right  of  voting,  which  shall  not  have  been  holden  three  calendar 
months  previous  to  the  day  of  election.    And  stockholders  actually 
resident  within  the  United  States,  and  none  other,  may  vote  in  elections 
by  proxy. 

2.  Not  more  than  three-fourths  of  the  directors  elected  by  the  stock- 
holders, and  not  more  than  four-fifths  of  the  directors  appointed  by  the 
President  of  the  United  States,  who  shall  be  in  office  at  the  time  of  an 
annual  election,  shall  be  elected  or  appointed  for  the  next  succeeding 


APPENDICES  483 


year ;  and  no  director  shall  hold  his  office  more  than  three  years  out  of 
four  in  succession ;  but  the  director  who  shall  be  the  president  at  the 
time  of  an  election  may  always  be  reappointed  or  re-elected,  as  the  case 
may  be. 

3.  None  but  a  stockholder,  resident  citizen  of  the  United  States, 
shall  be  a  director ;  nor  shall  a  director  be  entitled  to  any  emolument ; 
but  the  directors  may  make  such  compensation  to  the  president,  for 
his  extraordinary  attendance  at  the  bank,  as  shall  appear  to  them 
reasonable. 

4.  Not  less  than  seven  directors  shall  constitute  a  board  for  the 
transaction  of  business,  of  whom  the  president  shall  always  be  one, 
except  in  case  of  sickness  or  necessary  absence  ;  in  which  case  his  place 
may  be  supplied  by  any  other  director  whom  he,  by  writing,  under  his 
hand,  shall  depute  for  that  purpose.    And  the  director  so  deputed  may 
do  and  transact  all  the  necessary  business,  belonging  to  the  office  of  the 
president  of  the  said  corporation,  during  the  continuance  of  the  sick- 
ness or  necessary  absence  of  the  president. 

5.  A  number  of  stockholders,  not  less  than  sixty,  who,  together, 
shall  be  proprietors  of  one  thousand  shares  or  upwards,  shall  have 
power  at  any  time  to  call  a  general  meeting  of  the  stockholders,  for  pur- 
poses relative  to  the  institution,  giving  at  least  ten  weeks'  notice  in  two 
public  newspapers  of  the  place  where  the  bank  is  seated,  and  specify- 
ing in  such  notice  the  object  or  objects  of  such  meeting. 

6.  Each  cashier  or  treasurer,  before  he  enters  upon  the  duties  of 
his  office,  shall  be  required  to  give  bond,  with  two  or  more  sureties,  to 
the  satisfaction  of  the  directors,  in  a  sum  not  less  than  fifty  thousand 
dollars,  with  a  condition  for  his  good  behavior,  and  the  faithful  per- 
formance of  his  duties  to  the  corporation. 

7.  The  lands,  tenements,  and  hereditaments,  which  it  shall  be  lawful 
for  the  said  corporation  to  hold,  shall  be  only  such  as  shall  be  requisite 
for  its  immediate  accommodation  in  relation  to  the  convenient  transact- 
ing of  its  business,  and  such  as  shall  have  been  bona  fide  mortgaged  to 
it  by  way  of  security,  or  conveyed  to  it  in  satisfaction  of  debts  pre- 
viously contracted  in  the  course  of  its  dealings,  or  purchased  at  sales, 
upon  judgments  which  shall  have  been  obtained  for  such  debts. 

8.  The  total  amount  of  debts  which  the  said  corporation  shall  at  any 
time  owe,  whether  by  bond,  bill,  note,  or  other  contract,  over  and  above 
the  debt  or  debts  due  for  money  deposited  in  the  bank,  shall  not  exceed 
the  sum  of  thirty -five  millions  of  dollars,  unless  the  contracting  of  any 
greater  debt  shall  have  been  previously  authorized  by  law  of  the 
United  States.    In  case  of  excess,  the  directors  under  whose  adminis- 
tration it  shall  happen,  shall  be  liable  for  the  same  in  their  natural 
and  private  capacities ;  and  an  action  of  debt  may  in  such  case  be 
brought  against  them,  or  any  of  them,  their  or  any  of  their  heirs,  execu- 


484  THE  SECOND  BANK  OF  THE  UNITED  STATES 

tors  or  administrators,  in  any  court  of  record  of  the  United  States,  or 
either  of  them,  by  any  creditor  or  creditors  of  the  said  corporation,  and 
may  be  prosecuted  to  judgment  and  execution,  any  condition,  covenant, 
or  agreement  to  the  contrary  notwithstanding.  But  this  provision 
shall  not  be  construed  to  exempt  the  said  corporation  or  the  lands, 
tenements,  goods,  or  chattels  of  the  same  from  being  also  liable  for, 
and  chargeable  with,  the  said  excess.  Such  of  the  said  directors,  who 
may  have  been  absent  when  the  said  excess  was  contracted  or  created, 
or  who  may  have  dissented  from  the  resolution  or  act  whereby  the  same 
was  so  contracted  or  created,  may  respectively  exonerate  themselves 
from  being  so  liable,  by  forthwith  giving  notice  of  the  fact,  and  of  their 
absence  or  dissent,  to  the  President  of  the  United  States,  and  to  the 
stockholders,  at  a  general  meeting,  which  they  shall  have  power  to  call 
for  that  purpose. 

9.  The  said  corporation  shall  not,  directly  or  indirectly,  deal  or 
trade  in  anything  except  bills  of  exchange,  gold  or  silver  bullion,  or  in 
the  sale  of  goods  really  or  truly  pledged  for  money  lent  and  not 
redeemed  in  due  time,  or  goods  which  shall  be  the  proceeds  of  its 
lands.    It  shall  not  be  at  liberty  to  purchase  any  public  debt  whatso- 
ever, nor  shall  it  take  more  than  at  the  rate  of  six  per  centum  per 
annum  for  or  upon  its  loans  or  discounts. 

10.  No  loan  shall  be  made  by  the  said  corporation,  for  the  use  or  on 
account  of  the  Government  of  the  United  States,  to  an  amount  exceed- 
ing five  hundred  thousand  dollars,  or  of  any  particular  State  to  an 
amount  exceeding  fifty  thousand  dollars,  or  of  any  foreign  Prince  or 
State,  unless  previously  authorized  by  a  law  of  the  United  States. 

11.  The  stock  of  the  said  corporation  shall  be  assignable  and  trans- 
ferable, according  to  such  rules  as  shall  be  instituted  in  that  behalf, 
by  the  laws  and  ordinances  of  the  same. 

12.  The  bills,  obligatory  and  of  credit,  under  the  seal  of  the  said 
corporation,  which  shall  be  made  to  any  person  or  persons,  shall  be 
assignable  by  endorsement  thereupon,  under  the  hand  or  hands  of  such 
person  or  persons,  and  his,  her,  or  their  executors  or  administrators, 
and  his,  her  or  their  assignee  or  assignees,  and  so  as  absolutely  to 
transfer  and  vest  the  property  thereof  in  each  and  every  assignee  or 
assignees  successively,  and  to  enable  such  assignee  or  assignees,  and 
his,  her  or  their  executors  or  administrators,  to  maintain  an  action 
thereupon  in  his,  her  or  their  own  name  or  names :  Provided,  That 
said  corporation  shall  not  make  any  bill  obligatory,  or  of  credit,  or 
other  obligation  under  its  seal  for  the  payment  of  a  sum  less  than  five 
thousand  dollars.    And  the  bills  or  notes  which  may  be  issued  by  order 
of  the  said  corporation,  signed  by  the  president,  and  countersigned  by 
the  principal  cashier  or  treasurer  thereof,  promising  the  payment  of 
money  to  any  person  or  persons,  his,  her  or  their  order,  or  to  bearer, 


APPENDICES  485 


although  not  under  the  seal  of  the  said  corporation,  shall  be  binding 
and  obligatory  upon  the  same,  in  like  manner,  and  with  like  force  and 
effect,  as  upon  any  private  person  or  persons,  if  issued  by  him,  her  or 
them,  in  his,  her  or  their  private  or  natural  capacity  or  capacities,  and 
shall  be  assignable  and  negotiable  in  like  manner  as  if  they  were  so 
issued  by  such  private  person  or  persons ;  that  is  to  say,  those  which 
shall  be  payable  to  any  person  or  persons,  his,  her  or  their  order,  shall 
be  assignable  by  endorsement,  in  like  manner,  and  with  the  like  effect 
as  foreign  bills  of  exchange  now  are ;  and  those  which  are  payable  to 
bearer  shall  be  assignable  and  negotiable  by  delivery  only  :  Provided, 
That  all  bills  or  notes,  so  to  be  issued  by  said  corporation,  shall  be 
made  payable  on  demand,  other  than  bills  or  notes  for  the  payment  of 
a  sum  not  less  than  one  hundred  dollars  each,  and  payable  to  the  order 
of  some  person  or  persons,  which  bills  or  notes  it  shall  be  lawful  for  said 
corporation  to  make  payable  at  any  time  not  exceeding  sixty  days  from 
the  date  thereof. 

13.  Half-yearly  dividends  shall  be  made  of  so  much  of  the  profits  of 
the  bank  as  shall  appear  to  the  directors  advisable;  and  once  in  every 
three  years  the  directors  shall  lay  before  the  stockholders,  at  a  general 
meeting,  for  their  information,  an  exact  and  particular  statement  of  the 
debts  which  shall  have  remained  unpaid  after  the  expiration  of  the 
original  credit,  for  a  period  of  treble  the  term  of  that  credit,  and  of  the 
surplus  of  the  profits,  if  any,  after  deducting  losses  and  dividends.    If 
there  shall  be  a  failure  in  the  payment  of  any  part  of  any  sum  sub- 
scribed to  the  capital  of  the  said  bank,  by  any  person,  copartnership  or 
body  politic,  the  party  failing  shall  lose  the  benefit  of  any  dividend 
which  may  have  accrued  prior  to  the  time  for  making  such  payment, 
and  during  the  delay  of  the  same. 

14.  The  directors  of  the  said  corporation  shall  establish  a  competent 
office  of  discount  and  deposit  in  the  District  of  Columbia,  whenever  any 
law  of  the  United  States  shall  require  such  an  establishment;  also  one 
such  office  of  discount  and  deposite  in  any  State  in  which  two  thousand 
shares  shall  have  been  subscribed  or  may  be  held,  whenever,  upon 
application  of  the  Legislature  of  such  State,  Congress  may,  by  law, 
require  the  same:    Provided,  the  directors  aforesaid  shall  not  be  bound 
to  establish  such  office  before  the  whole  of  the  capital  of  the  bank  shall 
have  been  paid  up.    And  it  shall  be  lawful  for  the  directors  of  the  said 
corporation  to  establish  offices  of  discount  and  deposite,  wheresoever 
they  shall  think  fit,  within  the  United  States  or  the  Territories  thereof, 
and  to  commit  the  management  of  the  said  offices,  and  the  business 
thereof,  respectively,  to  such  persons,  and  under  such  regulations,  as 
they  shall  deem  proper,  not  being  contrary  to  law  or  the  constitution  of 
the  bank.    Or,  instead  of  establishing  such  offices,  it  shall  be  lawful  for 
the  directors  of  the  said  corporation  from  time  to  time,  to  employ  any 


486   THE  SECOND  BANK  or  THE  UNITED  STATES 

other  bank  or  banks,  to  be  first  approved  by  the  Secretary  of  the  Treas- 
ury, at  any  place  or  places  that  they  may  deem  safe  and  proper,  to  man- 
age and  transact  the  business  proposed  as  aforesaid,  other  than  for  the 
purposes  of  discount,  to  be  managed  and  transacted  by  such  offices,  under 
such  agreements,  and  subject  to  such  regulations,  as  they  shall  deem 
just  and  proper.  Not  more  than  thirteen,  nor  less  than  seven  managers 
or  directors,  of  every  office  established  as  aforesaid,  shall  be  annually 
appointed  by  the  directors  of  the  bank,  to  serve  one  year;  they  shall 
choose  a  president  from  their  own  number;  each  of  them  shall  be  a 
citizen  of  the  United  States,  and  a  resident  of  the  State,  Territory,  or 
district,  wherein  such  office  is  established;  and  not  more  than  three- 
fourths  of  the  said  managers  or  directors,  in  office  at  the  time  of  an 
annual  appointment,  shall  be  reappointed  for  the  next  succeeding  year; 
and  no  director  shall  hold  his  office  more  than  three  years  out  of  four, 
in  succession;  but  the  president  may  be  always  reappointed. 

15.  The  officer  at  the  head  of  the  Treasury  Department  of  the 
United  States  shall  be  furnished,  from  time  to  time,  as  often  as  he  may 
require,  not  exceeding  once  a  week,  with  statements  of  the  amount  of 
the  capital  stock  of  the  said  corporation  and  of  the  debts  due  to  the 
same;  of  the  moneys  deposited  therein;  of  the  notes  in  circulation,  and 
of  the  specie  in  hand;  and  shall  have  a  right  to  inspect  such  general 
accounts  in  the  books  of  the  bank  as  shall  relate  to  the  said  statement: 
Provided,  That  this  shall  not  be  construed  to  imply  a  right  of  inspect- 
ing the  account  of  any  private  individual  or  individuals  with  the  bank. 

16.  No  stockholder,  unless  he  be  a  citizen  of  the  United  States,  shall 
vote  in  the  choice  of  directors. 

17.  No  note  shall  be  issued  of  less  amount  than  five  dollars. 

SEC.  12.  And  be  it  further  enacted,  That  if  the  said  corporation,  or 
any  person  or  persons,  for  or  to  the  use  of  the  same,  shall  deal  or  trade 
in  buying  or  selling  goods,  wares,  merchandise,  or  commodities  whatso- 
ever, contrary  to  the  provisions  of  this  act,  [a  penalty  of  treble  the 
amount  so  dealt  in  shall  be  imposed  upon  the  persons  responsible]. 

[Sec.  13  enacts  that  in  case  of  loans  to  the  United  States,  in  ex- 
cess of  $500,000,  or  to  any  state  in  excess  of  $50,000,  or  to  "  any  foreign 
Prince,  or  State,"  without  previous  authorization  by  law,  a  penalty  of 
treble  value  shall  be  imposed  upon  the  persons  responsible.] 

SEC.  14.  And  be  it  further  enacted,  That  the  bills  or  notes  of  the 
said  corporation  originally  made  payable,  or  which  shall  have  become 
payable  on  demand,  shall  be  receivable  in  all  payments  to  the  United 
States,  unless  otherwise  directed  by  act  of  Congress. 

SEC.  15.  And  be  it  further  enacted,  That  during  the  continuance  of 
this  act,  and  whenever  required  by  the  Secretary  of  the  Treasury,  the 
said  corporation  shall  give  the  necessary  facilities  for  transferring  the 
public  funds  from  place  to  place,  within  the  United  States,  or  the  Ter- 


APPENDICES  487 


ritories  thereof,  and  for  distributing  the  same  in  payment  of  the  public 
creditors,  without  charging  commissions  or  claiming  allowance  on 
account  of  difference  in  exchange,  and  shall  also  do  and  perform  the 
several  and  respective  duties  of  the  Commissioners  of  Loans  for  the 
several  States,  or  of  any  one  or  more  of  them,  whenever  required  by  law. 

SEC.  16.  And  be  it  further  enacted,  That  the  depositesof  the  money 
of  the  United  States,  in  places  in  which  the  said  bank  and  branches 
thereof  may  be  established,  shall  be  made  in  said  bank  or  branches 
thereof,  unless  the  Secretary  of  the  Treasury  shall  at  any  time  other- 
wise order  and  direct;  in  which  case  the  Secretary  of  the  Treasury  shall 
immediately  lay  before  Congress,  if  in  session,  and  if  not,  immediately 
after  the  commencement  of  the  next  session,  the  reasons  of  such  order 
or  direction. 

SEC.  17.  And  be  it  further  enacted,  That  the  said  corporation  shall 
not  at  any  time  suspend  or  refuse  payment  in  gold  or  silver,  of  any  of 
its  notes,  bills,  or  obligations;  nor  of  any  moneys  received  upon  depos- 
ite  in  said  bank,  or  in  any  of  its  offices  of  discount  and  deposite.  [In 
case  of  such  suspension  or  refusal]  the  holder  of  any  such  note,  bill,  or 
obligation,  or  the  person  or  persons  entitled  to  demand  and  receive  such 
moneys  as  aforesaid,  shall  respectively  be  entitled  to  receive  and  recover 
interest  on  the  said  bills,  notes,  obligations,  or  moneys,  until  the  same 
shall  be  fully  paid  and  satisfied,  at  the  rate  of  twelve  per  centum  per 
annum  from  the  time  of  such  demand  as  aforesaid:  Provided,  That 
Congress  may  [hereafter  enact  laws  for  carrying  out  this  clause,  vesting 
jurisdiction  in  such  cases  in  any  of  the  courts  of  the  United  States,  or 
of  the  States]. 

[SEC.  18  prescribes  penalties  for  counterfeiting  "  any  bill  or  note 
....  or  any  order  or  check"  on  the  bank,  or  any  of  its  cashiers;  or  for 
altering  "any  bill  or  note  ....  order  or  check"  upon  the  bank  or 
any  of  its  cashiers ;  or  for  passing,  or  attempting  to  pass,  such  counter- 
feits or  such  altered  checks  or  orders;  or  for  selling  or  dealing  in  such 
counterfeits.] 

[SEC.  19  prescribes  penalties  for  engraving  plates  to  be  used  for 
counterfeiting  the  "  notes  or  bills "  of  the  bank,  or  for  having  in  pos- 
session "  paper  adapted  to  the  making  of  bank  notes  or  bills,"  similar  to 
the  paper  used  by  the  bank,  with  intent  to  use  such  paper  for  counter- 
feiting.] 

SEC.  20.  And  be  it  further  enacted,  That  in  consideration  of  the 
exclusive  privileges  and  benefits  conferred  by  this  act  upon  the  said 
bank,  the  president,  directors,  and  company  thereof,  shall  pay  to  the 
United  States,  [$1,500,000]. 

[Ssc.  21  enacts  that  no  other  bank,  excepting  local  banks  in  the 
District  of  Columbia,  shall  be  created  by  Congress  "  during  the  con- 
tinuance of  the  corporation  hereby  created,"  and  that  the  bank  shall 


488  THE  SECOND  BANK  OF  THE  UNITED  STATES 

have  the  space  of  two  years  after  the  expiration  of  its  charter  in  which 
to  settle  its  affairs.] 

[SEC.  22.  If  the  bank  does  not  begin  operations  by  the  first  Monday 
in  April,  1817,  Congress  may  declare  the  charter  "  null  and  void."] 

SEC.  23.  And  be  it  further  enacted,  That  it  shall,  at  all  times,  be 
lawful  for  a  committee  of  either  House  of  Congress,  appointed  for  that 
purpose,  to  inspect  the  books,  and  to  examine  into  the  proceedings  of 
the  corporation  hereby  created,  and  to  report  whether  the  provisions  of 
this  charter  have  been,  by  the  same,  violated  or  not;  and  whenever  any 
committee,  as  aforesaid,  shall  find  and  report,  or  the  President  of  the 
United  States  shall  have  reason  to  believe  that  the  charter  has  been 
violated,  it  may  be  lawful  for  Congress  to  direct,  or  the  President  to 
order  a  scire  facias  to  be  sued  out  of  the  circuit  court  of  the  district  of 
Pennsylvania,  in  the  name  of  the  United  States,  (which  shall  be 
executed  upon  the  president  of  the  corporation  for  the  time  being,  at 
least  fifteen  days  before  the  commencement  of  the  term  of  said  court,) 
calling  on  the  said  corporation  to  show  cause  wherefore  the  charter, 
hereby  granted,  shall  not  be  declared  forfeited;  and  it  shall  be  lawful 
for  the  said  court,  upon  the  return  of  the  said  scire  facias,  to  examine 
into  the  truth  of  the  alleged  violation,  and  if  such  violation  be  made  to 
appear,  then  to  pronounce  and  adjudge  that  the  said  charter  is  forfeited 
and  annulled:  Provided,  however,  Every  issue  of  fact  which  may  be 
joined  between  the  United  States  and  the  corporation  aforesaid,  shall 
be  tried  by  jury.  And  it  shall  be  lawful  for  the  court  aforesaid  to 
require  the  production  of  such  of  the  books  of  the  corporation  as  it  may 
deem  necessary  for  the  ascertainment  of  the  controverted  facts;  and 
the  final  judgment  of  the  court  aforesaid,  shall  be  examinable  in  the 
Supreme  Court  of  the  United  States,  by  writ  of  error,  and  may  be  there 
reversed  or  affirmed,  according  to  the  usages  of  law. 

Approved,  April  10, 1816. 

—Statutes  at  Large,  Vol.  Ill,  pp.  266  ff.,  chap,  xliv,  and  A.  of  C.,  14th  Cong.,  1st 
Sess.,Vol.  I,  pp.  1812  ff. 

APPENDIX  II 

Propositions  respectfully  submitted  to  the  convention  of  State 
banks  by  the  committee  on  the  part  of  the  Bank  of  the  United 
States: 

1.  That  the  incorporated  banks  of  New  York,  Philadelphia,  Balti- 
more, and  Richmond,  engage,  on  the  20th  instant,  to  commence,  and 
thenceforth  to  continue,  specie  payments  for  all  demands  upon  them. 

2.  That  in  the  liquidation  of  the  balances  which  may  be  due  by  the 
receiving  banks,  the  Bank  of'the  United  States  will  credit  those  banks, 


APPENDICES  489 


respectively,  with  the  amount  of  their  checks  upon  banks  which  may 
be  parties  to  this  agreement. 

3.  That  the  whole  of  the  public  balances  in  the  receiving  Banks  in 
New  York,  Philadelphia,  Baltimore,  and  Virginia,  be  transferred  to  the 
Bank  of  the  United  States  on  the  20th  of  this  month,  and  retained  by 
the  said  bank  until  the  1st  of  July  next,  when  the  same  shall  be  paid 
off,  together  with  the  interest  thereon. 

4.  The  payment  of  the  balances  which  may  accumulate  against  the 
aforesaid  banks  subsequently  to  the  transfer  of  the  balances  first  men- 
tioned shall  not  be  demanded  by  the  Bank  of  the  United  States  until 
the  said  bank  and  its  branches  shall  have  discounted  for  individuals 
(other  than  those  having  duties  to  pay)  subsequently  to  the  19th 
instant  the    following   sums,  to  wit:    For  those  in  New  York,  two 
millions;  for  those  in  Philadelphia,  two  millions;  for  those  in  Balti- 
more, one  and  a  half  million;  for  those  in  Virginia,  five  hundred  thou- 
sand dollars;  provided,  that  if  the  said  bank  shall  be  willing  to  dis- 
count, and  shall  not  have  the  required  amount  of  good  paper  offered 
within  the  term  of  sixty  days  from  the  20th  instant  at  New  York,  Phila- 
delphia, and  Baltimore,  and  within  the  same  term  after  the  operations 
of  the  offices  of  the  said  bank  in  Virginia  shall  have  commenced,  the 
aforesaid  banks  shall,  at  the  expiration  of  that  time,  at  the  aforesaid 
places,  respectively,  pay  to  the  Bank  of  the  United  States  the  balance 
due  by  them  respectively. 

5.  That  the  Bank  of  the  United  States  will  engage  to  discount  the 
required  amount  at  the  respective  places,  and  within  the  time  men- 
tioned in  the  preceding  articles,  provided  good  paper  to  that  amount 
shall  be  offered. 

6.  That  in  the  event  of  the  Bank  of  the  United  States  and  its 
branches  not  having  a  sufficient  amount  of  good  paper  offered  at  the 
respective  places  mentioned  in  the  fourth  article  within  the  period 
therein  stipulated,  then  the  Bank  of  the  United  States  will  engage  to 
discount  for  the  said    banks  the  amount  of  the  deficiency  at  the 
respective  places,  according  to  the  amount  of  the  capitals  of  the  said 
banks  respectively. 

7.  That  the  aforesaid  banks  shall  exchange  with  the  Bank  of  the 
United  States  and  its  branches,  from  day  to  day,  all  such  notes  of 
either  as  the  said  banks  may  receive;  and  an  interest  account  from  the 
20th  instant  to  the  1st  of  July  shall  be  liquidated  and  settled  in  the 
usual  manner. 

8.  That  the  Bank  of  the  United  States,  and  the  incorporated  banks 
of  New  York,  Philadelphia,  Baltimore,  and  Virginia,  will  interchange 
pledges  of  good  faith  and  friendly  offices,  and  upon  any  emergency 
which  may  menace  the  credit  of  the  aforesaid  banks  or  the  branches  of 
the  United  States  Bank,  will  cheerfully  contribute  their  resources  to  any 


490  THE  SECOND  BANK  OP  THE  UNITED  STATES 

reasonable  extent  in  support  thereof — the  Bank  of  the  United  States 
confiding  in  the  justice  and  discretion  of  the  State  banks,  respectively, 
to  circumscribe  their  affairs  within  the  just  limits  indicated  by  their 
respective  capitals  as  soon  as  the  interest  and  convenience  of  the  com- 
munity will  admit. 

9.  That  upon  the  mutual  agreement  of  the  parties  to  these  stipula- 
tions, the  same  shall  be  submitted  to  the  Secretary  of  the  Treasury  for 
his  decision  upon  those  points  which  involve  the  public  balances,  and 
when  approved  by  him  shall  be  obligatory  upon  all  the  contracting 
parties.  _Feb  ^  1817<  F ^  Vol  ^  p  m 

APPENDIX  III 

The  first  rules  of  the  bank  were  adopted  in  1816.  In  1832  they 
were  revised  (Biddle  to  Hugh  McElderry,  January  24,  1832,  P.  L. 
B.,  Vol.  IV,  p.  123),  and  as  revised  went  into  effect  May  3, 1833 
(Biddle  to  John  McKim,  May  3,  1833,  ibid.,  p.  478).  The  rules 
here  given  are  the  revised  rules  of  1833.  Wherever  these  differ 
from  those  of  1816,  the  differences  are  noted  in  brackets. 

RULES  AND  REGULATIONS  FOR  CONDUCTING  THE  BUSI- 
NESS OF  THE  BANK  OF  THE  UNITED  STATES 

Rule  1.  Days  and  Hours  of  business. — The  Bank  shall  be  kept  open 
for  the  transaction  of  business,  from  nine  o'clock  in  the  morning  until 
three  o'clock  in  the  afternoon  every  day  in  the  year,  except  Sundays, 
Christmas  day,  the  First  of  January,  and  the  Fourth  of  July. 

Rule  2.  Deposits. — The  Bank  shall  take  charge  of  the  cash  of  all 
such  persons  as  shall  choose  to  place  it  there,  free  of  expense,  and  shall 
keep  it  subject  to  the  order  of  the  depositor,  payable  at  sight ;  and  shall 
also  receive  special  deposits  of  ingots  of  gold,  bars  of  silver,  wrought 
plate,  and  other  valuable  articles  of  small  bulk,  for  safe  keeping,  at  the 
risk  of  the  depositor. 

Rule  3.  Days  of  Discount. — All  bills  and  notes  offered  for  discount, 
shall  be  delivered  into  Bank  on  Monday  and  Thursday  in  each  week, 
and  laid  before  the  Board  of  Directors,  on  the  succeeding  Tuesday  and 
Friday,  [rules  of  1816  add:  "at  ten  o'clock  in  the  morning,"]  together 
with  a  statement  of  the  funds  and  situation  of  the  Bank;  on  which  days 
the  discounts  shall  be  settled,  and  such  as  shall  be  admitted  shall  be 
passed  to  the  credit  of  the  applicants  on  the  day  on  which  they  are  dis- 
counted, and  may  be  drawn  for  at  anytime  after  twelve  [1816,  "one"] 
o'clock;  and  the  notes  or  bills  not  discounted,  shall  be  returned  at  any 
time  after  twelve  [1816,  "  one  "]  o'clock  of  the  same  day. 


APPENDICES  491 


Rule  4.  Discounts,  and  accommodation. — Discounts  shall  not  be 
made  upon  personal  security  without  two  responsible  names  (the  firm 
of  a  house  being  considered  as  one  name  only;)  but  if  stock  of  this  Bank, 
funded  debt  of  the  United  States,  or  such  other  property  as  shall  be 
approved  by  the  Board,  be  deposited  and  pledged  to  an  amount  suffi- 
cient to  secure  the  payment,  with  all  damages,  one  responsible  name 
maybe  taken.  [1816  adds:  "  But  no  accommodation  note  (i.  e.  &  note, 
the  proceeds  of  which  are  to  be  placed  to  the  credit  of  the  drawer)  shall 
be  discounted,  unless  its  payment  be  secured  by  a  deposit  of  the  stock 
of  this  Bank,  or  of  funded  debt  of  the  United  States,  or  such  other 
property  as  shall  be  approved  by  the  Board  ;  together  with  an  express 
authority  to  the  Bank  to  sell  the  deposit  in  case  of  non-payment  at  any 
time  after  the  note  shall  become  due."] 

Rule  5.  Mode  of  decision  on  application  for  discounts. —  On  each 
application  for  discount,  every  Director  who  may  be  present,  shall  be 
held  to  give  his  opinion  for  or  against  the  same.  And  no  discount  shall 
be  made  without  the  consent  of  three-fourths  of  the  directors  present ; 
and  all  notes  and  bills  discounted  shall  be  entered  in  a  book,  to  be  called 
the  Credit  Book,  in  such  manner  as  to  discover  to  the  Board,  at  one 
view,  on  each  discount  day,  the  amount  for  which  any  person  is  indebted 
to  the  Bank,  either  as  payer,  discounter,  or  indorser.  [1816  reads:  "the 
amount  which  any  person  is  discounter,  or  is  indebted  to  the  Bank, 
either  as  payer  or  as  indorser."] 

Rule  6.  Overdrafts. —  On  every  discount  day,  the  name  of  every  per- 
son who  shall  have  overdrawn  the  Bank  since  the  last  discount  day, 
shall  be  reported  to  the  Board ;  and  no  person  while  he  remains  an 
overdrawer,  shall  have  any  note  or  bill  discounted  at  this  Bank.  And 
in  no  instance  will  this  Bank  give  a  release  or  discharge  to  any  debtor 
where  the  debt  arises  from  an  overdraft.  And  every  officer  who  shall 
knowingly  suffer  an  overdraft  to  be  made  on  the  Bank,  without  com- 
municating it  to  the  President  or  [1816,  "  and "]  Cashier,  shall  be  dis- 
missed from  the  service  of  the  Bank. 

Rule  7.  Protest.— It  any  bill  or  note  belonging  to  this  Corporation, 
shall  not  be  paid  before  the  shutting  of  the  Bank  on  the  last  day  of 
grace,  such  bill  or  note  shall  be  forthwith  protested ;  and  while  such 
bill  or  note  remains  unpaid,  no  discount  or  accommodation  shall  be 
granted  to  any  drawer,  acceptor,  or  indorser  of  the  same.  Bills  and 
notes  deposited  for  collection,  at  any  time  before  the  commencement 
of  the  days  of  grace,  shall  be  proceeded  with,  as  bills  and  notes  dis- 
counted ;  unless  the  person  depositing  the  same  shall  otherwise  direct 
in  writing  ;  provided,  that  in  case  of  non-payment  and  protest,  the  per- 
son lodging  the  same  shall  pay  the  charges  of  protest. 

Rule  8.  Books  of  Signatures. —  Every  person  who  opens  an  account, 
and  transacts  business  with  this  Bank,  shall  subscribe  his  name  in  a 


492  THE  SECOND  BANK  OF  THE  UNITED  STATES 

book,  to  be  kept  for  that  purpose,  to  be  called  The  book  of  signatures, 
and  all  the  persons  who  compose  any  house,  keeping  any  [1816,  "  an  "] 
account  with  this  Bank,  shall  subscribe  their  names,  and  the  signature 
of  the  firm,  in  this  book,  if  residing  in  Philadelphia. 

Rule  9.  The  cash  account  of  individuals  not  to  be  examined  by  a 
Director. —  No  director,  without  special  authority,  shall  be  permitted  to 
inspect  the  cash  account  of  any  person  with  this  Bank. 

Rule  10.  Times  for  balancing  the  books,  <&c. — The  books  and 
accounts  of  the  Bank  shall  be  regularly  balanced  on  the  first  day  [1816, 
"  Monday  "]  in  January  and  July  in  each  year;  and  [1816, "  at  which  time"] 
the  half-yearly  dividends  shall  be  declared,  on  the  first  Monday  in  said 
months,  [1816  omits  "  on  the  first  Monday  in  said  months,"]  and  pub- 
lished in  at  least  three  of  the  newspapers  in  the  city  of  Philadelphia  :  — 
and  the  books  of  transfer  shall  be  shut  for  ten  [1816,  "  twenty "]  days 
immediately  preceding  each  of  the  days  appointed  for  declaring  the 
half  yearly  dividends.  [1816  reads  :  "  appointed  for  balancing  the  books 
of  the  Bank  and  declaring  the  half-yearly  dividends."] 

Rule  11.  Cashier  may  receive  the  dividends  on  the  Bank  shares, 
and  interest  of  the  funded  debt  of  the  United  States. —  In  all  cases  when 
required,  the  Cashier  shall  accept  powers  of  attorney  for  receiving  any 
interest  or  dividend  due,  or  to  become  due,  on  any  shares  in  this  Bank, 
or  on  any  funded  debt  of  the  United  States  payable  in  Philadelphia ; 
which  interest  or  dividend  shall  be  held  by  the  Bank,  subject  to  the 
order  of  the  proprietor,  free  of  charge. 

Rule  12.  How  lost  certificates  are  to  be  renewed. —  If  any  person 
claims  a  certificate  of  Bank  stock  to  be  issued  in  lieu  of  one  lost  or 
destroyed,  he  shall  make  an  affidavit  of  the  fact,  and  state  the  circum- 
stances of  the  loss  or  destruction  ;  and  he  shall  advertise  in  one  or  more 
of  the  public  newspapers  in  the  city  of  Philadelphia,  for  the  space  of 
six  weeks,  an  account  of  the  loss  or  destruction,  describing  the  certifi- 
cate and  its  number,  calling  on  all  persons  to  show  cause  why  a  new 
certificate  shall  not  issue  in  lieu  of  that  lost ;  and  he  shall  transmit  to 
the  Bank  his  affidavit,  and  the  advertisements  before  mentioned,  and 
give  to  the  Bank  a  bond  of  indemnity,  with  one  or  more  sureties  if 
required,  (in  the  sum  of  two  hundred  dollars,  for  each  share  to  be 
renewed)  against  any  damage  which  may  arise  from  issuing  the  new 
certificate  :  whereupon  the  Cashier  shall,  six  months  after  the  notice  by 
advertisement  as  aforesaid,  issue  a  new  certificate,  of  the  same  number 
and  tenor  with  that  said  to  be  lost  or  destroyed,  and  specifiying  that  it 
is  in  lieu  thereof. 

Rule  13.  Committees. — A  Committee  on  the  Offices  consisting  of  five 
members,  shall  be  appointed  by  the  President  every  three  months,  who 
shall  have  special  charge  of  the  situation  and  concerns  of  the  several 
Offices  and  Agencies,  with  authority  to  report  such  measures  in  relation 


APPENDICES  493 


thereto  as  they  may  deem  beneficial.  The  said  Committee  shall  have 
like  charge  of  all  matters  relating  to  the  nomination  and  election  of 
Directors  for  the  several  Offices. 

A  Committee  on  Exchange  consisting  of  three  members  shall  be 
appointed  at  the  same  time  and  in  like  manner,  who  shall  have  special 
charge  of  all  matters  relating  to  the  operations  of  the  Bank  and  its 
Offices,  in  Foreign  and  Domestic  Exchange  and  Bullion  —  and  who 
shall  act  as  a  daily  Committee  for  the  purchase  of  Domestic  Exchange 
at  the  Bank. 

A  Committee  on  the  State  of  the  Bank  consisting  of  five  members 
shall  at  the  same  time  be  appointed  by  ballot,  who  shall  have  charge  of 
such  matters  relative  to  the  local  business  of  the  Bank  as  may  from 
time  to  time  be  referred  to  them  by  the  Board ;  they  shall  at  least 
once  during  their  time  of  service  examine  and  count  the  discounted 
notes,  and  compare  the  amount  thereof  with  the  balance  of  the  amount 
of  bills  discounted  in  the  General  Ledger;  they  shall  also  count  the 
cash,  and  the  printed  and  unprinted  paper  in  the  possession  of  the 
Cashier  —  examine  the  evidences  of  the  public  debt  and  property  of 
the  Corporation,  make  an  inventory  of  the  same  to  be  compared  with 
the  books  in  order  to  ascertain  their  agreement,  and  report  to  the 
Board. 

[1816  reads:  "Two  Directors  shall,  weekly  and  in  rotation,  be 
appointed  as  a  committee  of  Directors  for  the  week;  whose  more  espe- 
cial duty  it  shall  be,  to  attend  at  the  Bank  during  their  respective 
weeks  of  service,  as  often  as  their  convenience  will  permit ;  and  when 
requested  by  the  President,  to  afford  their  aid  and  advice  in  all  cases 
relative  to  the  interest  and  business  of  the  Bank.  And  a  Committee  on 
the  State  of  the  Bank,  shall  be  appointed  by  ballot  every  three  months, 
to  examine  and  count  the  discounted  notes,  and  compare  the  amount 
thereof  with  the  balance  of  the  amount  of  bills  discounted  in  the  gen- 
eral ledger;  they  shall  also  count  the  cash,  and  the  printed  and 
unprinted  paper  in  the  possession  of  the  President,  and  examine  the 
evidences  of  the  public  debt  and  other  property  of  the  Corporation,  and 
make  an  inventory  of  the  same  to  be  compared  with  the  books  in  order 
to  ascertain  their  agreement,  and  make  a  report  to  the  Board."] 

Rule  14.  Election  of  Directors.— Thirty  days'  notice  shall  be  given 
by  the  Cashier  in  at  least  two  of  the  daily  newspapers  of  Philadelphia, 
of  each  annual  election  for  Directors  of  the  Bank;  and  within  one  week 
preceding  the  same,  the  Directors  for  the  time  being,  shall  appoint  by 
ballot  five  Stockholders,  not  being  Directors,  to  be  Judges  of  the  elec- 
tion, who  shall  conduct  and  regulate  the  same,  commencing  at  ten 
o'clock,  A.M.  on  the  first  Monday  of  January. 

But  in  case  an  election  of  Directors  shall  not  begin,  or  shall  not  be 
completed  on  the  said  first  Monday,  the  Judges  shall  adjourn  the  same 


494  THE  SECOND  BANK  OP  THE  UNITED  STATES 

from  day  to  day,  not  exceeding  five  days  until  the  said  election  shall  be 
completed. 

The  Judges  shall  on  the  forenoon  on  the  day  after  the  election 
shall  have  been  completed,  at  the  furthest,  transmit  to  the  Cashier  of 
the  Bank,  an  authentic  certificate  of  the  persons  elected :  and  the 
Cashier  shall  thereupon  forthwith  give  notice  to  all  of  the  said  Directors 
who  shall  be  within  convenient  distance,  to  meet  at  the  Bank  at  six 
o'clock  in  the  evening  of  the  same  day  for  the  purpose  of  choosing  a 
President. 

[1816  reads :  "  On  the  Friday  preceding  each  annual  election  for 
Directors  of  this  Bank,  the  Directors  for  the  time  being  shall  appoint 
by  ballot  five  stockholders,  not  being  Directors,  to  be  judges  of  the  elec- 
tion ;  who  shall  conduct  and  regulate  the  same,  commencing  at  ten 
o'clock  A.M."] 

Rule  15.  Mode  of  electing  officers  of  the  Bank,  &c. —  In  every  elec- 
tion to  an  office  (except  that  of  the  President)  by  this  Board,  there  shall 
be  a  previous  nomination  of  the  candidate  at  least  one  week  before  the 
election :  Provided,  that  such  previous  nomination  may  be  dispensed 
with  by  an  unanimous  vote  of  the  Directors  present: — [1816,  proviso 
omitted]  and  every  President,  Cashier  and  Assistant  Cashier  [1816  omits 
"and  Assistant  Cashier,"  placing  an  "and"  between  President  and 
Cashier]  of  this  Bank,  shall  take  and  subscribe,  an  oath  or  affirmation, 

to  the  following  effect, —  to  wit:  —  I do  swear  (or  affirm)  that 

I  will  to  the  best  of  my  knowledge  and  abilities,  perform  the  duties 

assigned  to,  and  the  trust  reposed  in  me,  as of  the  Bank  of 

the  United  States. 

Rule  16.  Duties  of  the  President. —  It  shall  be  the  duty  of  the 
President  to  take  into  his  custody  at  the  Bank,  the  Seal  of  the  Bank 
which  he  shall  cause  to  be  affixed  to  all  instruments  and  documents 
when  so  ordered  by  the  Board;  and  to  sign  all  bills  and  notes  issued  by 
the  Corporation. 

He  shall  preside  at  all  meetings  of  the  Board,  except  in  cases  of 
necessary  absence,  convene  the  Directors  on  special  occasions,  and  serve 
as  a  member  of  all  committees  of  the  Board. 

[1816  reads:  "It  shall  be  the  duty  of  the  President  to  take  into  his 
custody  at  the  Bank,  the  plates,  paper  moulds,  and  bank  paper;  to 
superintend  the  printing  of  all  bills  or  notes  ordered  by  the  Directors 
to  be  printed;  and  to  keep  a  regular  account  of  the  Bank  paper  in  his 
custody,  and  the  quantity  ordered  from  time  to  time  for  impression, 
which  account  shall  be  checked  by  quarterly  examinations  by  the  com- 
mittee on  the  state  of  the  Bank.  He  shall  also  sign  all  bills  and  notes 
issued  by  the  Corporation;  and  have  in  his  custody  the  seal  of  the 
Bank,  which  he  shall  cause  to  be  affixed  to  all  such  instruments  and 
documents  as  the  Directors  shall  order."] 


APPENDICES  495 


Rule  17.  Duties  of  the  Cashier. —  It  shall  be  the  duty  of  the 
Cashier  to  countersign  all  bills,  notes,  certificates  of  stock,  and  bills  of 
exchange  to  be  signed  by  the  President,  or  by  order  of  the  Board:  He 
shall  take  into  his  custody  at  the  Bank,  the  plates,  paper-moulds,  bank 
note  paper,  unprinted  and  printed  until  issued,  blank  certificates  of 
stock,  and  bills  of  exchange,  superintend  the  printing  of  whatever  sup- 
plies of  these  may  from  time  to  time  be  considered  necessary  for  the  use 
of  the  Bank  and  Offices;  keep  a  regular  account  of  all  the  articles  in  his 
custody,  which  account  shall  be  checked  by  quarterly  examinations  by 
the  Committee  on  the  State  of  the  Bank;  he  shall  attend  all  meetings 
of  the  Board,  keep  a  fair  and  regular  record  of  its  proceedings,  furnish 
official  extracts  therefrom,  and  give  all  such  information  as  may  be 
required  by  the  Board  or  any  Committees. 

He  shall  correspond  with  the  Officers  of  the  several  Offices,  as  the 
organ  of  the  Board  or  Committees  of  the  Board,  in  directing  the  general 
operations  of  the  Bank,  in  stock  and  bullion,  and  in  foreign  and  domes- 
tic exchange;  he  shall  also  correspond  with  the  Agents  of  the  Bank  in 
Europe,  and  with  all  other  persons  doing  business  with  the  Bank  on 
subjects  connected  with  his  department;  he  shall  carefully  observe  the 
conduct  of  all  persons  employed  under  him,  and  report  to  the  Board 
such  instances  of  neglect,  incapacity  or  bad  conduct  as  he  may  discover 
in  any  of  them,  and  generally  shall  perform  all  such  other  services  as 
may  be  required  of  him  by  the  Board. 

[1816  reads:  "It  shall  be  the  duty  of  the  Cashier,  to  countersign,  at 
the  Bank,  all  bills  or  notes  to  be  signed  by  the  President,  or  by  order  of 
the  Board:  carefully  to  observe  the  conduct  of  all  persons  employed 
under  him,  and  report  to  the  Board  such  instances  of  neglect,  inca- 
pacity, or  bad  conduct  as  he  may  discover  in  any  of  them: — daily  to 
examine  the  settlement  of  the  cash  accounts  of  the  Bank: — to  take 
charge  of  the  cash,  and  whenever  the  actual  amount  disagrees  with  the 
balance  of  the  cash  account,  report  the  same  to  the  President  and 
Directors  without  delay: — to  attend  all  meetings  of  the  Board;  keep  a 
fair  and  regular  record  of  its  proceedings;  give  such  information  to  the 
Board  as  may  be  required;  consult  with  committees  when  requested, 
on  subjects  referred  by  the  Board;  and  also  to  perform  such  other  ser- 
vices as  may  be  required  of  him  by  the  Board."] 

Rule  18.  Duty  of  the  first  Assistant  Cashier. —  It  shall  be  the  duty 
of  the  First  Assistant  Cashier  to  take  charge  of  the  local  operations  of 
the  Bank  in  Philadelphia  in  the  same  manner  and  with  the  same 
duties,  as  the  Cashiers  of  the  offices  do  of  the  concerns  of  their  respect- 
ive Offices,  except  when  otherwise  provided  by  the  by-laws  or  directed 
by  the  Board;  carefully  to  observe  the  conduct  of  all  persons  employed 
under  him,  and  report  to  the  President  and  Cashier  such  instances  of 
neglect,  incapacity  or  bad  conduct  as  shall  come  to  his  knowledge,  daily 


496  THE  SECOND  BANK  OF  THE  UNITED  STATES 

to  examine  the  settlement  of  the  cash  accounts  of  the  Bank,  to  take 
charge  of  the  cash,  and  whenever  the  actual  amount,  disagrees  with  the 
balance  of  the  cash  account  report  the  same  to  the  President  and 
Cashier  without  delay,  and  generally  to  perform  such  services  as  shall 
be  required  of  him  by  the  Board,  the  President,  or  the  Cashier. 

Rule  19.  Duty  of  Second  Assistant  Cashier. —  It  shall  be  the  duty 
of  the  Second  Assistant  Cashier  to  take  charge  of  the  general  state- 
ments and  accounts  of  the  Bank;  the  accounts  between  the  several 
Offices,  the  accounts  with  the  Government  of  the  United  States,  the 
foreign  exchange  accounts,  and  the  returns  of  all  foreign  or  domestic 
bills  purchased  at  the  Offices.  On  all  these  subjects  he  shall  corre- 
spond with  the  Offices  and  the  parties  concerned,  under  the  special 
superintendence  of  the  President  and  Cashier;  and  generally  perform 
such  other  services  as  may  be  required  by  the  Board  or  by  the  Presi- 
dent or  Cashier. 

Rule  20.  Duties  of  the  third  Assistant  Cashier. —  It  shall  be  the 
duty  of  the  third  Assistant  Cashier  to  take  charge  of  the  Suspended 
Debt  and  the  Real  Estate  of  the  Bank  and  the  several  Offices,  and  cor- 
respond thereon  with  the  Officers  and  Agents  of  the  Bank  and  the 
Offices,  and  with  other  parties  concerned  under  the  special  superin- 
tendence of  the  President  and  Cashier,  and  generally  perform  such 
other  services  as  may  be  required  by  the  Board,  or  by  the  President  or 
the  Cashier. 

[1816  has  rule  18  for  18, 19,  20,  as  follows:  "  It  shall  be  the  duty  of 
the  Assistant  Cashier  to  perform  the  duties  of  the  Cashier,  in  case  of 
his  sickness  or  absence;  to  superintend  the  opening  and  keeping  of  the 
stock  ledgers,  and  all  other  books  of  the  Bank;  to  observe  the  conduct 
of  all  those  employed  under  him,  and  report  to  the  Cashier  such 
instances  of  neglect,  incapacity  or  bad  conduct  as  shall  come  to  his 
knowledge;  and  generally  to  perform  such  services  as  shall  be  required 
of  him  by  the  Board,  the  President,  or  the  Cashier."] 

Rule  21  [1816, 19],  How  the  Cashier  and  Assistant  Cashiers  [1816, 
"  cashier  "]  are  to  be  elected. —  In  the  election  of  Cashier,  or  Assistant 
Cashiers,  [1816,  "  Cashier "]  the  ballots  shall  be  first  taken  for  all  the 
candidates,  and  if  no  one  shall  have  a  majority  of  the  votes  of  all  the 
Directors  present,  [1816,  "  present "  omitted]  then  the  three  candidates 
having  the  highest  number  shall  be  voted  for  again;  and  if  no  one  shall 
be  elected,  the  ballots  shall  be  then  taken  on  the  two  highest. 

Rule  22  [1816, 20].  Security  to  be  given  by  the  Cashier  and  other  offi- 
cers, &c. —  The  Cashier  before  he  enters  upon  the  duties  of  his  office  [1816 
omits  "  before  ....  his  office  "]  shall  give  bond  to  the  President,  Direct- 
ors and  Company,  with  two  or  more  approved  sureties,  in  the  sum  of 
seventy  thousand  dollars,  with  a  condition  for  his  good  behaviour,  and 
the  faithful  performance  of  his  duties  to  the  Corporation.  The  First 


APPENDICES  497 


Assistant  Cashier,  [1816  omits  "  First "]  and  the  Cashier  at  each  Office, 
shall  give  bond,  in  like  manner,  in  the  sum  of  fifty  thousand  dollars, 
with  the  same  condition.  The  Second  and  Third  Assistant  Cashiers 
shall  give  bond  in  like  manner  in  the  sum  of  twenty-five  thousand  dol- 
lars with  the  same  condition.  [1816,  this  sentence  omitted.]  The  pay- 
ing and  the  receiving  Tellers,  in  the  sum  of  twenty  thousand  dollars 
each:  The  Book-keepers,  Discount  Clerks,  Note  Clerks,  and  other 
Clerks,  in  the  sum  of  five  thousand  dollars  each;  and  the  Porters  in 
the  sum  of  two  thousand  dollars  each,  with  the  same  condition. 

Rule  23  [1816,  21].  Clerks,  cfcc.  prohibited  from,  having  an  account 
with  the  Bank. —  No  Clerk  or  Porter  in  this  institution  shall  be  permitted 
to  have  an  account  with  the  Bank,  but  shall  receive  his  salary  quar- 
terly, or  monthly.  [1816  adds:  "from  the  Cashier,  or  his  Assistant: "] 
And  every  Clerk  and  servant  of  the  Bank  shall  take,  and  subscribe,  an 

oath  or  affirmation  to  the  following  effect,  to  wit: — I do  swear 

or  (affirm)  that  I  will  to  the  best  of  my  knowledge  and  abilities,  per- 
form the  duties  assigned  to,  [1816  omits  to]  and  the  trust  reposed  in  me 

as of  the  Bank  of  the  United  States,  and  keep  secret  the  business 

thereof. 

Rule  24  [1816,  22}.  How  the  present  rules,  &c.  may  be  altered  or 
repealed. —  None  of  the  foregoing  rules  or  regulations  shall  be  repealed 
or  altered,  unless  a  majority  of  all  the  Directors  vote  for  the  repeal  or 
alteration,  nor  unless  upon  a  motion  offered  for  that  purpose  at  a 
previous  meeting  of  the  Board. 

Rule  25  [1816,  23].  How  the  proceedings  of  the  Board  o/ Directors 
are  to  be  governed.— The  proceedings  of  the  Board  of  Directors,  when 
conducting  their  business  as  a  deliberative  body,  shall  be  governed  by 
the  following  articles. 

1.  When  the  President  takes  the  chair,  the  members  shall  take 
their  seats. 

2.  The  Discounts  shall  be  settled,  and  [1816  omits  these  words]  the 
minutes  of  the  preceding  meeting,  shall  then  [1816  omits  "  then "]  be 
read  before  the  Board  proceeds  to  any  other  business;  and  no  debate 
shall  be  admitted,  nor  question  taken,  at  such  reading,  except  as  to 
errors  and  inaccuracies.     [1816  adds:  "The  state  of  the  Bank  shall 
then  be  read,  and  the  discounts  settled."] 

3.  The  President  shall  be  the  judge  of  order,  and  his  decisions 
shall  be  immediately  submitted  to,  unless  two  members  require  an 
appeal  to  the  Board.    He  shall  name  all  Committees,  unless  herein 
otherwise  provided,  or  unless  the  Board  shall  otherwise  determine;  and 
he  shall  call  special  meetings  of  the  Board,  whenever  in  his  opinion  the 
business  may  require  it,  or  on  the  request  of  three  members  of  the 
Board. 

4.  Every  member  presenting  a  paper  to  the  chair,  shall  first  state 


498  THE  SECOND  BANK  OP  THE  UNITED  STATES 

its  general  purport;  and  every  member  who  shall  make  a  motion,  or 
offer  a  resolution,  or  speak  on  any  subject  under  discussion,  shall  rise 
and  address  the  President. 

5.  No  debate  shall  be  entered  into  on  any  motion,  or  resolution, 
until  it  shall  be  stated  from    the  chair;  and  all    motions   shall,  if 
requested  by  the  President  or  by  two  members,  be  reduced  to  writ- 
ing; and  no  member  shall  speak  more  than  twice  upon  any  one  ques- 
tion without  leave  from  the  Board. 

6.  While  a  resolution  is  under  consideration,  no  motion  shall  be 
made,  except  to  amend,  divide,  commit  or  postpone  it:  But  it  shall  be 
in  order,  at  any  time,  on  the  call  of  three  members,  to  take  the  previous 
question.,  which  shall  be  "  Will  the  Board  at  this  time  act  on  this  sub- 
ject?" and  if  it  shall  be  decided  in  the  affirmative,  the  debate  may  be 
continued.    A  motion  to  adjourn,  shall  always  be  in  order,  but  shall  be 
decided  without  debate. 

7.  A  member  may  call  for  the  division  of  a  question  or  resolution 
where  the  sense  will  admit  of  it;  but  no  amendment  which  tends  to 
destroy  the  general  sense  of    the  clause  of    a    resolution    shall    be 
admitted. 

8.  If  business  of  different  kinds  shall  be  called  for,  at  the  same 
time,  by  different  members,  the  Board  will  judge  and  give  preference 
accordingly. 

9.  The  yeas  and  nays  shall  be  taken  on  any  question,  if  called  for 
by  two  members  previous  to  the  decision  on  such  question;  but  no 
motion  for  reconsideration  shall  be  permitted,  unless  made  and  seconded 
by  members  who  were  in  the  majority  on  the  original  question. 

10.  At  the  request  of  any  two  of  the  Board,  the  names  of  the  mem- 
bers who  make  and  second  a  motion  shall  be  entered  on  the  minutes. 

Date  and  place  of  publication  unknown.  Pamphlet  secured 
from  the  Massachusetts  State  Library. 

APPENDIX  IV 

AN  ACT  to  modify  and  continue  the  Act  entitled  "An  Act  to  incor- 
porate the  subscribers  to  the  Bank  of  the  United  States." 

[SEC.  1  continues  the  original  charter  for  fifteen  years  with  "  the 
modifications  and  changes  hereinafter  expressed."] 

SEC.  2.  And  be  it  further  enacted,  That  the  directors  of  the  said 
corporation  shall  have  power  to  appoint  two  or  more  officers,  with 
authority  to  sign  and  countersign  any  or  all  the  notes  thereof,  the  de- 
nomination of  each  of  which  shall  be  less  than  one  hundred  dollars; 
which  notes,  when  signed  and  countersigned  by  the  said  officers,  respect- 


APPENDICES  499 


ively,  shall,  to  all  intents  and  purposes,  be  binding  and  obligatory  upon 
the  said  corporation  as  if  the  same  had  been  signed  by  the  President, 
and  countersigned  by  the  principal  Cashier  or  Treasurer  thereof;  and  it 
shall  be  the  duty  of  the  directors  of  the  said  corporation  to  make  known, 
in  writing,  and  as  soon  as  may  be,  to  the  Secretary  of  the  Treasury,  the 
names  of  the  officers  who  shall  be  appointed  by  virtue  of  the  provision: 
Provided,  That  from  and  after  the  third  day  of  March,  one  thousand 
eight  hundred  and  thirty-six,  no  branch  bank  draft,  or  other  bank  paper 
not  payable  at  the  place  where  issued,  shall  be  put  in  circulation,  as 
currency,  by  the  bank,  or  any  of  its  offices,  except  notes  of  the  denomi- 
nation of  fifty  dollars,  or  of  some  greater  sum. 

SEC.  3.  And  be  it  further  enacted,  That  it  shall  not  be  lawful  for 
the  said  corporation  to  issue,  pay  out,  or  put  in  circulation,  any  note  or 
notes  of  a  denomination  less  than  fifty  dollars,  which  shall  not,  upon  the 
faces  thereof,  respectively,  be  payable  at  the  bank  or  office  of  discount 
and  deposite  whence  they  shall  be  issued,  paid  out,  or  put  in  circulation. 

SEC.  4.  And  be  it  further  enacted,  That  the  notes  or  bills  of  the 
said  corporation,  although  the  same  be,  upon  the  faces  thereof,  respect- 
ively, made  payable  at  one  place  only,  shall,  nevertheless,  be  received 
by  the  said  corporation  at  the  bank,  or  at  any  of  the  offices  of  discount 
and  deposite  thereof,  if  tendered  in  liquidation  or  payment  of  any  bal- 
ance or  balances  due  to  said  corporation,  or  to  such  office  of  discount 
and  deposite,  from  any  other  incorporated  bank. 

SEC.  5.  And  be  it  further  enacted,  That  it  shall  not  be  lawful,  after 
the  said  third  day  of  March,  in  the  year  one  thousand  eight  hundred 
and  thirty-six,  for  the  said  corporation  to  hold,  keep,  and  retain,  for  a 
period  exceeding  five  years  after  the  date  of  acquiring  the  same,  any 
right,  title,  or  interest,  except  by  way  of  mortgage  or  judgment  lien  in 
security  of  debts,  to  any  lands,  tenements,  and  hereditaments,  other  than 
those  requisite  for  its  accommodation  in  relation  to  the  convenient 
transacting  of  its  business;  and  it  shall  be  the  duty  of  said  corporation, 
within  the  aforesaid  period  of  five  years,  to  sell,  dispose  of,  or  otherwise 
bona  fide  divest  itself  of  all  right,  title,  and  interest  to  any  lands,  tene- 
ments, and  hereditaments,  conveyed  to  it  in  satisfaction  of  debts  pre- 
viously contracted  in  the  course  of  its  dealings,  or  purchased  at  sales 
upon  judgments  which  shall  have  been  obtained  for  such  debts;  and  for 
any  and  every  violation  of  this  provision,  the  said  corporation  shall  be 
subject  to  a  penalty  of  ten  thousand  dollars,  to  be  recovered  in  the  name 
of  the  United  States  of  America,  by  a  qui-tam  action  of  debt  instituted 
in  any  court  of  the  United  States  having  jurisdiction  of  the  same  ;  one- 
half  of  which  shall  enure  to  the  benefit  of  the  informer,  and  the  other 
half  to  the  use  of  the  United  States. 

SEC.  6.  And  be  it  further  enacted,  That  from  and  after  the  said 
tenth  day  of  April,  in  the  year  one  thousand  eight  hundred  and  thirty- 


500  THE  SECOND  BANK  OP  THE  UNITED  STATES 

six,  it  shall  not  be  lawful  for  the  directors  of  the  said  corporation  to 
have,  establish,  or  retain,  more  than  two  offices  of  discount  and  deposite 
in  any  State:  Provided,  That  nothing  herein  contained  shall  prevent 
the  said  corporation  from  retaining  any  of  the  branches  which  are  now 
established. 

SEC.  7.  And  be  it  further  enacted,  That,  in  consideration  of  the  ex- 
clusive benefits  and  privileges  continued  by  this  act  to  the  said  corpo- 
ration for  fifteen  years  as  aforesaid,  the  said  corporation  shall  pay  to  the 
United  States  the  annuity  or  yearly  sum  of  two  hundred  thousand  dol- 
lars ;  which  said  sum  shall  be  paid  on  the  fourth  day  of  March  in  each 
and  every  year,  during  the  said  term  of  fifteen  years. 

SEC.  8.  And  be  it  further  enacted,  That  it  shall  be  lawful  for  Congress 
to  provide,  by  law,  that  the  said  bank  shall  be  restrained,  at  any  time 
after  the  third  day  of  March,  in  the  year  one  thousand  eight  hundred 
and  thirty -six,  from  making,  issuing,  or  keeping  in  circulation,  any  notes 
or  bills  of  said  bank,  or  any  of  its  offices,  of  a  less  sum  or  denomination 
than  twenty  dollars. 

SEC.  9.  And  be  it  further  enacted,  That  the  Cashier  of  the  bank 
shall,  annually,  report  to  the  Secretary  of  the  Treasury  the  names  of  all 
stockholders  who  are  not  resident  citizens  of  the  United  States ;  and, 
on  application  of  the  Treasurer  of  any  State,  shall  make  out  and  trans- 
mit to  such  Treasurer  a  list  of  stockholders  residing  in,  or  citizens  of, 
such  State,  with  the  amount  of  stock  owned  by  each. 

[SEC.  10.  All  acts  supplementary  to  the  original  charter  and  "  not  in- 
consistent with  this  act "  to  continue  in  force  during  the  term  of  the 
present  act.] 

[SEC.  11.  The  president  and  directors  of  the  bank  must  "  signify  to 
the  President  of  the  United  States  their  acceptance  "  of  this  act  by  the 
"  first  day  of  the  next  session  of  Congress."] 

A.  STEVENSON, 

Speaker  of  the  House  of  Representatives. 

J.  C.  CALHOUN, 
Vice  President  of  the  United  States  and  President  of  the  Senate. 

(Endorsed.) 

I,  certify,  that  this  act  did  originate  in  the  Senate. 

WALTER  LOWBIE, 

Secretary. 
—  Senate  Journal,  22d  Cong.,  1st  Sess.,  p.  451. 


APPENDICES 


501 


APPENDIX  V 

GENERAL  STATEMENT  OP  THE  BANK  OF  THE  UNITED  STATES,  1817-36 


DISCOUNTS  ON 

DATES 

Personal  Sec. 

Bank  Stock 

Other 
Securities 

1817  February 

397,000 

182,000 

4,829,000 

July 

25,770,000 

1818,  March  

29,609,000 

11,244,000 

327,000 

9,475,000 

July  

30,318,000 

10,591,000 

548,000 

9,430,000 

1819,  January  

27,092,000 

8,363,000 

330,000 

7,391,000 

July  

22,762,000 

7,949,000 

236,000 

7,139,000 

1820,  January  

20,980,000 

7,035,000 

1,897,000 

7,192,000 

July  

20,760,000 

6,996,000 

737,000 

9,158,000 

1821,  January  

20,598,000 

6,693,000 

2,104,000 

9,155,000 

July  

20,013,000 

6,503,000 

124,000 

13,360,000 

1822,  January  

20,342,000 

6,066,000 

78,000 

13,318,000 

July  

22,334,000 

6,126,000 

61,000 

13,112,000 

1823,  January  

22,597,000 

6,149,000 

50,000 

11,018,000 

July  

24,821,000 

6,884,000 

74,000 

10,876,000 

1824,  January  

24,324,000 

6,708,000 

75,000 

10,874,000 

July  

23,844,000 

5,876,000 

76,000 

15,872,000 

1825,  January  

23,170,000 

5,655,000 

258,000 

18,422,000 

July  

26,666,000 

2,798,000 

148,000 

20,738,000 

1826,  January  

27,104,000 

3,131,000 

69,000 

18,303,000 

July  

26,945,000 

3,019,000 

780,000 

17,764,000 

1827,  January  

24,330,000 

2,933,000 

326,000 

17,764,000 

July  

25,749,000 

2,429,000 

575,000 

17,764,000 

1828,  January  

26,452,000 

1,928,000 

280,000 

17,624,000 

July  

29,281,000 

1,951,000 

821,000 

17,352,000 

1829,  January  

29,854,000 

1,375,000 

298,000 

16,099,000 

July  

31,790,000 

1,359,000 

1,046,000 

14,932,000 

1830,  January  

30,654,000 

1,002,000 

315,000 

11,610,000 

July  

31,304,000 

918,000 

653,000 

10,674,000 

1831,  January  
July  

32,827,000 
40,559,000 

665,000 
866,000 

83,000 
22,000 

8,674,000 
3,674,000 

1832,  January  
July  

48,852,000 
43,397,000 

731,000 
518,000 

18,000 
1,920,000 

2,000 

1833,  January  

40,085,000 

687,000 

2,854,000 

July    

37,032,000 

827,000 

3,833,000 

1834,  January  .... 

33,703,000 

912,000 

3,993,000 

July    

29,932,000 

1,031,000 

3.459,000 

1835,  January 

29,933,000 

1,006,000 

3,686,000 

July  

32,132,000 

1,860,000 

6,228,000 

1836,  January  

22,273,000 

3,503,000 

14,206,000 

March  3  

20,148,000 

3,060,000 

17,385,000 

502   THE  SECOND  BANK  OP  THE  UNITED  STATES 


GENERAL  STATEMENT  OP  THE  BANK  OP  THE  UNITED  STATES,  1317-36 — 

Continued 


Dates 

Domestic 
Exchange 

Real 

Estate 

Banking 
House  and 
Permanent 
Expenses 

Balancesi 
with 
Ear  ope  an 
Bankers 

Balances1 
with 
State 
Banks 

1817,  Feb  

8,848,000 

July  

2,424,000 

1818,  March... 

175,000 

—    324,000 

1,203,000 

July  

423,000 

—    572,000 

2,463,000 

1819,  Jan  

433,000 

—    812,000 

2,624,000 

July  

742,000 

—       3,000 

2,908,000 

1820,  Jan  

1,487,000 

1,296,000 

-1,792,000 

2,727,000 

July  

1,712,000 

1,345,000 

—1,027,000 

727,000 

1821,  Jan  

1,508,000 

1,886,000 

—1,969,000 

1,178,000 

July.... 
1822,  Jan  

1,745,000 
1,573,000 

429,000 
563,000 

1,880,000 
1,855,000 

-    702,000 
—    932,000 

-   291,000 
1,717,000 

July  .... 
1823,  Jan   

3,273,000 
1,940,000 

595,000 
626,000 

1,999,000 
1,956,000 

-1,258,000 
—1,268,000 

1,055,000 
1,407,000 

July.... 
1824,  Jan  

3,023,000 
2,323,000 

736,000 
1,302,000 

1,893,000 
1,871,000 

-    759,000 
414,000 

1,205,000 
1,287,000 

July  .... 
1825,  Jan  

2,896,000 
2,727,000 

1,418,000 
1,495,000 

1,880,000 
1,852,000 

527,000 
-2,383,000 

296,000 
2,130,000 

July  .... 
1826,  Jan  

3,917,000 
3,118,000 

1,568,000 
1,848,000 

1,831,000 
1,792,000 

517,000 
170,000 

241,000 
747,000 

July  .... 
1827,  Jan  

4,275,000 
3,347,000 

1,620,000 
2,039,000 

1,809,000 
1,678,000 

173,000 
180,000 

1,833,000 
1,683,000 

July  .... 
1828,  Jan  

5,437,000 
5,022,000 

2,163,000 
2,295,000 

1,625,000 
1,634,000 

969,000 
-1,111,000 

1,834,000 
—  1,697,000 

July  .... 
1829,  Jan   

6,451,000 
7,689,000 

2,354,000 
2,345,000 

1,600,000 
1,557,000 

-    352,000 
482,000 

-1,737,000 
1,723,000 

July  .... 
1830,  Jan  

8,821,000 
8,691,000 

2,606,000 
2,886,000 

1,502,000 
1,444,000 

1,447,000 
1,530,000 

1,960,000 
1,199,000 

July  .... 
1831,  Jan  

10,361,000 
10,456,000 

2,802,000 
2,629,000 

1,384,000 
1,344,000 

3,756,000 
2,383,000 

1,335,000 
—    734,000 

July  .... 
1832,  Jan  
July  .... 
1833,  Jan  
July.... 
1834,  Jan  
July  .... 
1835,  Jan  
July  .... 
1836,  Jan  
March  3. 

15,113,000 
16,691,000 
22,579,000 
18,069,000 
21,676,000 
16,302,000 
16,601,000 
17,183,000 
24,976,000 
19,250,000 
17,750,000 

2,493,000 
2,136,000 
1,829,000 
1,855,000 
1,809,000 
1,741,000 
1,741,000 
1,760,000 
1,758,000 
1,486,000 
2,570,000 

1,298,000 
1,159,000 
1,174,000 
1,181,000 
1,187,000 
1,189,000 
1,222,000 
1,218,000 
1,218,000 
967,000 
474,000 

144,000 
-1,356,000 
630,000 
3,106,000 
1,911,000 
1,801,000 
3,827,000 
1,922,000 
2,378,000 
73,000 
-    370,000 

-     60,000 
1,993,000 
2,552,000 
1,596,000 
485,000 
1,536,000 
408,000 
1,490,000 
-2,065,000 
1,427,000 
2,653,000 

i  A  minus  sign  prefixed  indicates  that  the  balances  were  against  the  bank. 


APPENDICES 


503 


GENERAL  STATEMENT  OP  THE  BANK  OP  THE  UNITED  STATES,  1817-36 — 

Continued 


Dates 

Circulation 

Public 
Deposits 

Other 
Deposits 

Specie 

1817,  February  .... 
July  

1,911,000 
4,759,000 

10,180,000 
24,746,000 

1,052,000 
3,023,000 

1,724,000 
2,129,000 

1818,  March   

8,339,000 

7,370,000 

4,909,000 

2,515,000 

July  

9,045,000 

7,967,000 

4,786,000 

2,357,000 

1819,  January  

6,563,000 

2,856,000 

2,936,000 

2,666,000 

July  

5,213,000 

3,670,000 

2,643,000 

2,954,000 

1820,  January  

3,589,000 

3,560,000 

3,008,000 

3,392,000 

July  

4,005,000 

2,925,000 

3,963,000 

5,821,000 

1821,  January  .  . 

4,567,000 

2,928,000 

4,996,000 

7,643,000 

July  

5,551,000 

2,944,000 

4,362,000 

5,876,000 

1822,  January  

5,578,000 

2,616,000 

5,457,000 

4,761,000 

July  

5,620,000 

3,388,000 

3,839,000 

3,350,000 

1823,  January  

4,361,000 

4,275,000 

3,347,000 

4,424,000 

July  

4,629,000 

7,733,000 

3,688,000 

4,910,000 

1824,  January  

4,647,000 

10,181,000 

3,520,000 

5,813,000 

July  

6,383,000 

8,159,000 

6,043,000 

5,588,000 

1825,  January  

6,068,000 

6,702,000 

5,330,000 

6,746,000 

July  

9,540,000 

7,992,000 

5,966,000 

4,048,000 

1826,  January  

9,474,000 

5,769,000 

5,444,000 

3,960,000 

July  

10,210,000 

9,783,000 

5,630,000 

6,194,000 

1827,  January  

8,549,000 

8,982,000 

5,337,000 

6,457,000 

July  

10,198,000 

9,449,000 

6,257,000 

6,381,000 

1828,  January  
July  

9,855,000 
10,890,000 

8,354,000 
11,554,000 

6,142,000 
6,402,000 

6,170,000 
6,621,000 

1829,  January  

11,901,000 

10,697,000 

6,364,000 

6,098,000 

July  

13,691,000 

11,657,000 

7,122,000 

6,641,000 

1830,  January  .... 

12,924,000 

9,654,000 

6,391,000 

7,608,000 

July  

15,346,000 

10,437,000 

7,928,000 

10,252,000 

1831,  January  

16,251,000 

9,131,000 

8,165,000 

10,808,000 

July  

19,195,000 

7,655,000 

9,103,000 

12,175,000 

1832,  January  

21,355,000 

12,589,000 

8,107,000 

7,038,000 

July  

20,520,000 

11,872,000 

8,115,000 

7,519,000 

1833,  January  
July  

17,518,000 
19,366,000 

12,752,000 
6,512,000 

7,518,000 
9,868,000 

8,951,000 
10,098,000 

1834,  January  
July  

19,208,000 
16,641,000 

4,030,000 
2,675,000 

6,734,000 
6,735,000 

10,031,000 
12,823,000 

1835,  January  
July  

17,339,000 
25,332,000 

2,621,000 
1,686,000 

7,844,000 
9,558,000 

15,708,000 
13,429,000 

1836,  January  
March  3  

23,075,000 
21,109,000 

627,000 
324,000 

4,369,000 
3,390,000 

8,417,000 
5,595,000 

—  Compiled  from  8.  D.  17,  23d  Cong.,  2d  Sess.,  pp.  204-24 ;  S.  D.  128,  25th  Cong.,  2d 
Sess.,  pp.  208-11 ;  and  the  monthly  reports  of  the  bank. 


504   THE  SECOND  BANK  OF  THE  UNITED  STATES 


PROFITS  OP  THE  BANK 


Date 

Discounts 

Exchange 

Total  Net  Profits 

Rate  per 
Cent,  of 
Dividends 

1817,  July  

325359.70 

873.21 

1,021,873.40 

2  A. 

1818,  January.  .  . 
July  

1,152,329.79 
1,210,106.63 

51,044.18 
101,039.77 

1,382,216.84 
1,266,186.99 

4 

3M 

1819,  January.  .  . 
July  

988,218.85 
863,239.22 

142,186.93 
153,820.18 

899,010.58 
983,479.08s) 

2^ 

1820,  January.  .  . 
July  

694,611.72 
673,302.14 

106,805.70 
65,327.05 

784,843.45  I 
718,590.60  f 

Carried 
to  contin- 

1821, January... 
July  

620,478.01 
566,466.61 

44,882.71 
49,092  34 

733,867.91  1 
750,438  82 

gent  fund 
W* 

1822,  January.  .  . 
July  

512,174.82 
557,568  14 

32,523.77 
62  716  48 

719,006.79 
1,009  727  84 

2 

2U 

1823,  January.  .  . 
July  

573,725.55 
652,828.51 

49,802.83 
97,303  46 

884,105.81 
932,488  32 

2M 

2vi 

1824,  January.  .  . 
July  

678,566.03 
636,893.39 

67,353.42 
90,395  98 

929,083.02 
976,932.46 

2^ 
VA 

1825,  January.  .  . 
July  

558,630.82 
663,808.36 

78,766.11 
142  887  31 

1,031,255.76 
1,154,939  88 

VA 
29! 

1826,  January.  .  . 
July  

711,058.14 
722,868.76 

107,354.50 
169,598.23 

1,162,485.83 
1,218,141.46 

2M 

1827,  January.  .  . 
July  

721,606.42 
724,627.58 

101,386.53 
227,388.08 

1,147,562.10 
1,273,501.15 

3 
3 

1828,  January.  .  . 
July  

697,961.34 
779,671.03 

190,750.04 
260,453.13 

1,202,595.38 
1,349,352.24 

3 

3% 

1829,  January.  .  . 
July  

823,240.35 
882,689.48 

274,045.86 
359,283  79 

1,325,274.93 
1,381,199.87 

3^ 
3j2 

1830,  January.  .  . 
July  

876,599.40 
889,149.07 

372,961.60 
452,418.65 

1,392,442.15 
1,414,351.96 

3^ 
3^4 

1831,  January.  .  . 
July  

889,911.31 
1,049,710.53 

401,485.58 
556,283.01 

1,344,779.68 
1,590,241.51 

*% 
&4 

1832,  January.  .  . 
July  

1,254,319.23 
1,298,051.43 

584,331.51 
741,752.90 

1,716,292.05 
1,861,218.69 

3% 
3V| 

1833,  January.  .  . 
July  

1,234,520.03 
1,121,443.34 

676,125.99 
751,287.75 

1,594,115.75 
1,601,950.56 

3K 
3% 

1834,  January.  .  . 
July.. 

1,074,112.54 
939,341.35 

605,356.28 
759,993  32 

1,430,320.32 
1,498,434.87 

3^ 
3% 

—8.  D.  17,  23d  Cong.,  2d  Sess.,  p.  194. 


APPENDICES 


505 


APPENDIX  VI 

EXCHANGE  TRANSACTIONS  —  ANNUAL  TOTALS  OP  INLAND  BILLS 
PURCHASED i 


1820  .  . 

$19,342,000 

$  5,526,300 

1828  .  . 

$  74,889,000 

$21,396,800 

1821  .  .  . 

20,242,000 

5,782,330 

1829  .  . 

102,012,000 

29,146,200 

1822  .  .  . 

29,008,000 

8,288,000 

1830  .. 

115,008,000 

32,882,200 

1823  .  .  . 

31,435,000 

8,980,000 

1831  .  . 

173,364,000 

49,532,500 

1824  .  .  . 

31,162,000 

8,903,400 

1832  .  . 

237,708,000 

67,916,500 

1825  .  .  . 

39,633,000 

11,323,700 

1833.. 

237,697,000 

67,913,400 

1826  .  .  . 

43,310,000 

12,374,200 

1834  .. 

186,255,000 

53,215,700 

1827  .  .  . 

56,487,000 

16,139,100 

1835  .. 

259,653,000 

74,816,000 

APPENDIX  VII 

RATES  OP  EXCHANGE,  1829-32 

At  which  Draughts  are  sold,  and  Domestic  Bills  purchased  or  collected, 
by  the  Bank  of  the  United  States  and  its  Offices  of  Discount  and 
Deposit. 


OFFICE  AT 

BANK  UNITED  STATES 

BOSTON 

PROVIDENCE 

Draughts 
Sold 

Bills  Pur- 
chased 

Draughts 
Sold 

Bills  Pur- 
chased 

Draughts 
Sold 

Bills  Pur- 
chased 

B.  U.  S  

par@M 

par 

par@K 

par 
par 

Boston  
Providence.. 
New  York.  . 
Baltimore.  .  . 
Washington. 
Charleston.  . 
N.  Orleans.  . 
Nashville  .  .  . 
Lexington  .  . 
Cincinnati  .  . 
Pittsburgh.  . 

par 
par 
par 
par 
par 

par@M 
par@^ 
par@^ 

M 
par®  YZ 
par@% 

par 
par 
par 
par 
par 

X 

% 

par 
par 
par 

par 

par@M 

par 
par 
par 
par 

M 

par 

par 
par 
par 

1 

par  @  y± 
par@K 
par@^ 

K 

par@K 

par 

par@^ 
par@i£ 
par@K 
M 

1 

1 

par@)^ 

'The  aggregated  totals  for  the  years  do  not  show  as  much  as  could  be  wished. 
They  do  show  a  very  large  business  in  exchange,  and  they  show  a  great  increase  in 
the  business  done,  but  they  do  not  tell  how  much  money  was  actually  invested  in 
bills  of  exchange  and  drafts.  This  they  do  not  do  because  the  reports  are  for  each 
month,  while  the  bills  were  drawn  for  two,  three,  four,  and  siz  months.  Consequently 
the  same  transactions  must  appear  repeatedly  in  the  different  reports.  All  things 
considered,  105  days,  or  three  and  a  half  months,  would  probably  be  the  average 
period  for  which  bills  were  bought.  Therefore,  dividing  by  three  and  a  half,  the 
yearly  aggregates  will  probably  give  the  yearly  amounts  of  exchange  dealt  in  by  the 
bank.  The  first  column  here  given  shows  the  sum  of  the  monthly  figures  for  each 
year  as  given  in  the  bank  reports.  The  second  column  is  the  first  divided  by  three 
and  a  half.  This  method  of  computation  is  fairly  accurate,  as  is  evident  where  a  com- 
parison with  the  figures  of  others  is  possible. 


506  THE  SECOND  BANK  OF  THE  UNITED  STATES 


RATES  OP  EXCHANGE,  1829-32  —  Continued 


OFFICE  AT 

NEW  YORK 

BALTIMORE 

WASHINGTON 

Draughts 
Sold 

Bills  Pur- 
chased 

Draughts 
Sold 

Bills  Pur- 
chased 

Draughts 
Sold 

Bills  Pur- 
chased 

B.  U.  S  

par@^ 
par 
par 

par 
par 
par 

par 

par 
par 
par 
par 

par 

par@}£ 

X 

par 

Boston  
Providence.  . 
New  York.  . 

par 

par 

Baltimore.  .  . 
Washington. 
Charleston.  . 
N.  Orleans  .  . 
Nashville  .  .  . 
Lexington  .  . 
Cincinnati  .  . 
Pittsburgh.  . 

par 
par 
par@J^ 

par@K 
par@i^ 

? 

P»r@^ 

par 
par 

¥ 

K 

par 

par@% 
par@^ 
par@i£ 
par@% 

M 

par@M 
par@^ 

par 

par@^ 
par 
par@K 
M 
par@^ 
par@^ 

1 

1 

¥ 

•if 

1 

OFFICE  AT 

CHARLESTON 

NEW  ORLEANS 

NASHVILLE 

Draughts 
Sold 

Bills  Pur- 
chased 

Draughts 
Sold 

Bills  Pur- 
chased 

Draughts 
Sold 

Bills  Pur- 
chased 

B.  U.  S  

par@i^ 

¥ 

1 

1 

1 
1 
1 
1 
1 
1 

par 

K 

Boston  

Providence.  . 
New  York.  .  . 
Baltimore..  . 

l 

M 

par@^ 

fc'i'i 

1 

Washington. 
Charleston  . 
N.  Orleans  .  . 
Nashville  .  .  . 
Lexington  .  . 
Cincinnati.  . 

par 

par 
par@M 

par 

par@K 
par@K 

1 

par@}£ 
X 

1 

K 

par@K 
M 
par@K 

K@l 

1 

1 
1 
1 

1& 

M 

¥ 

l 

Pittsburgh.  . 

par 

OFFICE  AT 

LEXINGTON 

CINCINNATI 

PITTSBURGH 

Draughts 
Sold 

Bills  Pur- 
chased 

Draughts 
Sold 

Bills  Pur- 
chased 

Draughts 
Sold 

Bills  Pur- 
chased 

B.  U.  S  

par 

X 

par 

X 

par@^ 

¥ 

Boston  

Providence.  . 
New  York.  .  . 

K 

X 

S 

par 

Baltimore..  . 

Washington. 
Charleston.  . 
N.  Orleans.. 
Nashville  .  .  . 
Lexington  .  . 

par 
par  @  % 

par@K 
par@^ 

i 

par 

par@K 
par@^ 
par@i^ 

M 

par 
par@^ 
par@^ 
par@J^ 
M 
par@K 

1 

M 

K 

1 

K 

Cincinnati  .  . 
Pittsburgh.  . 

par@M 
par 

par 

M 

— H.  «.  358,  21st  Cong.,  1st  Sess.,  pp.  34-7,  Appendix  2. 


APPENDICES 


507 


RATES  AT  WHICH  DOMESTIC  EXCHANGE  is  PURCHASED 


ByB. 
U.S. 
At 

Date 

On 
Phil. 

On 
Bos. 

On 

Prov. 

On 
N.  Y. 

On 

Bait. 

On 

W'sh. 

On 

Chas. 

On 

N.  O. 

On 

N'sh. 

On 
Lex. 

On 

Cin. 

On 

Pitt. 

Phi. 
Bos. 

AT  f\ 

1833 
Oct. 

M 

'% 

y± 

M 
M 

K 
¥ 

1A 
X 

M 

1 
1 

1 
1 

1^ 

1^ 
1  1/ 

1^ 

IK 
1  1/ 

IK 

IK 
1  1/ 

1^ 
1^ 

JN.U 

Cin. 
Phi 

(( 

1834 
Oct. 

y* 

x 

yz 

X 

y* 

% 

y* 

'i' 

ATS 

T 

-"•T^ 

V 

Bos. 

M 

i 

?, 

2^ 

2^ 

2^ 

2^ 

N  O 

14 

Cin 

(i 

\6 

16 

\6 

14 

\(, 

2 

— S.  D.  392,  24th  Cong.,  1st  Sess.,  pp.  6,  8. 


APPENDIX  VIII 

EXCHANGE  TRANSACTION  OP  THE  BANK  OP  THE  UNITED  STATES 
(OOO's  omitted) 


North  and 
East 

South 

Missis- 
sippi and 
Ohio 
Valleys 

Per  Cent 
of  Whole 
Done  in 
West  and 
Southwest 

New  Orleans,  Nash- 
ville, Louisville, 
Lexington,  1829-32  ; 
New  Orleans,  Mo- 
bile, Natchez,  Nash- 
ville, and  Louis- 
ville for  the  rest 

New 
Orleans 

1824. 

$15,327 

$  6,915 

$     8,891 

.286 

1825.. 

16,090 

10,375 

12,855 

.327 

1826.. 

18,887 

13,312 

11,121 

.257 

1827 

25,715 

13,570 

17,187 

.321 

1828.. 

30,744 

15,609 

28,510 

.381 

1829.. 
1830.. 
1831.. 
1832.. 
1833.. 
1834.. 
1835.. 
1836 

36,839 
32,394 
60,413 
64,134 
80,889 
64,083 
95,747 
8,074 

19,180 
17,736 
18,580 
30,245 
29,399 
27,979 
36,703 
4,496 

47,110 
64,863 
94,314 
143,304 
126,338 
94,202 
127,203 
25,027 

.457 
.564 
.544 
.603 
.534 
.506 
.492 
.667 

$  36,262 
52,097 
73,016 
119,274 
109,884 
85,778 
114,360 

$16,163 
22,500 
38,450 
49,766 
46,300 
36,427 
57,426 

Returns  for  the  individual  office  are  not  complete  before  1824.  These  figures 
are  the  totals  of  the  monthly  figures  for  the  year.  They  do  not  express  anything  but 
the  relative  increase  of  the  operations.  The  real  totals  would  be  found  approxi- 
mately by  dividing  by  3Mi. 


508  THE  SECOND  BANK  OP  THE  UNITED  STATES 


EXCHANGE  TRANSACTIONS  AT  NEW  ORLEANS 


Proportion  of 
the  Whole 

Proportion  of 
Western  and 
Southwestern 

Proportion  of 
the  Whole 

Proportion  of 
Western  and 
Southwestern 

1829.. 

.158 

.343 

1833  ... 

.194 

366 

1830  

.195 

.346 

1834  ... 

195 

393 

1831  

.221 

406 

1835     . 

334 

451 

1832  

.209 

347 

APPENDIX  IX 

DISTRIBUTION  OP  THE  BANK'S  STOCK 


1820 
Oct.  2 

1821 
April  2 

1822 
Jan.  1 

1823 
July  7 

1828 
Sept.  2 

1831 
July 

1832 
Jan.  17 

Maine  

676 

715 

745 

746 

511 

498 

498 

Mass  

17,397 

20,961 

24,196 

27,837 

16,646 

10,812 

11,175 

R.  I  

4,124 

4,122 

3,867 

3,217 

1,801 

1.245 

1,218 

Conn  

2,109 

2,141 

1,809 

2,361 

1,251 

1J511 

1,539 

N.H  

1,048 

891 

852 

832 

587 

501 

301 

Vermont  
New  York  .  . 
Penn  

62 
23,543 
37,334 

62 
28,116 
36231 

62 

44,200 
37,268 

132 

40,289 
37,269 

57 
46,638 
70,763 

27 
32,903 
52,638 

27 
30,881 
51,028 

New  Jersey. 
Delaware  .  .  . 
Maryland  .  .  . 
Virginia  
Dist.  of  Col. 
N.  Carolina  . 
S.  Carolina  .  . 
Georgia  
Kentucky  .  . 
Ohio  

1,249 
867 
41,528 
17,590 
2,791 
2,461 
47,458 
7,846 
796 
2,104 

1,546 
867 
42,702 
16,340 
2,791 
2,595 
40,199 
8,409 
704 
2,099 

1,111 
684 
37,748 
15,061 
2,815 
2,240 
33,444 
3,853 
234 
2,096 

2,017 
666 
38,490 
13,059 
2,432 
2,351 
29,685 
2,817 
337 
712 

3,084 
1,264 
34,262 
10,872 
3,448 
3,115 
35,495 
2,216 
607 
588 

2,665 
1,583 
34,503 
12,384 
2,814 
2,476 
40,674 
1,981 
252 
705 

2,787 
1,531 
34,235 
11,617 
2,725 
2,391 
40,242 
1,981 
252 
356 

Louisiana.  .  . 
Tennessee  .  . 

891 
194 

908 
196 

665 
151 
54 

306 
191 

154 
269 
10 

119 
238 

119 

258 

Indiana 

30 

50 

50 

310 

220 

167 

42 

42 

U  S  A-Navy 

62 

23 

393 

502 

Foreign  

29,288 
503 

30,400 
803 

28,317i 
481 

30,017 
496 

40,412 

79,159 

84,055 

Bank  U.S.. 
U.  S  

38,079 
70,000 

36,179 
70,000 

37,654 
70,000 

38,239 
70,000 

5,610 
70,000 

70,666 

70,666 

Total  amount  of  stock,  350,000  shares. 

i  Mostly  pledged,  and  owned  by  United  States  citizens. 

—  For  1820, 1821, 1822,  NILES,  Vol.  XXI,  p.  355;  1823,  ibid.,  Vol.  XXV,  p.  326,  and 
F.,  Vol.  IV,  p.  369;  1828,  NILES,  Vol.  XXXV,  p.  73  (Sept.  27,  1828) ;  1831,  ibid.,  Vol.  XLI, 
p.  112;  1832,  S.  D.  31,  22d  Cong.,  1st  Sess. 


APPENDICES  509 


APPENDIX  X 

RULES  AND  REGULATIONS  FOR  THE  GOVERNMENT  OF 
THE  OFFICES  OF  DISCOUNT  AND  DEPOSIT 

It  has  not  been  possible  to  procure  a  copy  of  the  Rules  and 
Regulations  for  the  Offices.  The  following  have  been  collected 
from  various  sources: 

ART.  4.  The  directors  of  the  Bank  of  the  United  States  shall 
appoint  the  cashiers  of  the  offices  of  discount  and  deposit. 

ART.  5.  It  shall  be  the  duty  of  the  cashier  carefully  to  observe  the 
conduct  of  all  persons  employed  under  him,  and  report  to  the  board 
such  instances  of  neglect,  incapacity,  or  bad  conduct  as  he  may  discover 
in  any  of  them ;  daily  to  examine  the  settlement  of  the  cash  account  of 
the  office ;  take  charge  of  the  cash,  and  whenever  the  actual  amount 
disagrees  with  the  balance  of  the  cash  account,  report  the  same  to  the 
president  and  directors  without  delay ;  to  attend  all  meetings  of  the 
board ;  keep  a  fair  and  regular  account  of  its  proceedings ;  give  such 
information  to  the  board  as  may  be  required ;  consult  with  committees 
when  requested,  on  subjects  referred  by  the  board ;  and  also  to  per- 
form such  other  services  as  may  be  required  of  him  by  the  board. 

ART.  12.  There  shall  be  at  least  one  discount  day  in  each  week, 
when  the  directors  shall  be  assembled ;  a  majority  of  the  members 
shall  be  required  to  form  a  quorum,  except  for  the  purpose  of  settling 
discounts,  for  which  five  shall  constitute  a  quorum,  and  no  bill  or  note 
shall  be  discounted  the  unexpired  term  of  which  exceeds  sixty  days. 

ART.  14.  All  bills  and  notes  offered  for  discount  shall  be  laid  before 
the  board  of  directors  by  the  cashier  on  the  days  assigned  for  discount, 
together  with  a  statement  of  the  funds  and  situation  of  the  office,  for 
their  information. 

ART.  15.  Discounts  shall  not  be  made  on  personal  security  without 
two  responsible  names  (the  firm  of  a  house  being  considered  as  one 
name  only) ;  but  if  the  stock  of  the  Bank  of  the  United  States,  funded 
debt  of  the  United  States,  or  such  other  property  as  shall  be  approved 
by  the  board,  be  deposited  and  pledged  to  an  amount  sufficient  to 
secure  the  payment,  with  all  damages,  one  responsible  name  may  be 
taken.  But  no  accommodation  note  (i.  e.  a  note,  the  proceeds  of  which 
are  to  be  placed  to  the  credit  of  the  drawer)  shall  be  discounted,  unless 
its  payment  be  secured  by  a  deposit  of  the  stock  of  this  bank,  or  of 
funded  debt  of  the  United  States,  or  such  other  property  as  shall  be 
approved  by  the  board ;  together  with  an  express  authority  to  the  bank 
to  sell  the  deposit  in  case  of  non-payment  at  any  time  after  the  note 
shall  become  due. 


510  THE  SECOND  BANK  OP  THE  UNITED  STATES 

ART.  16.  On  each  application  for  discount,  every  director  who  may 
be  present,  shall  be  held  to  give  his  opinion  for  or  against  the  same. 
And  no  discount  shall  be  made  without  the  consent  of  three-fourths  of 
the  directors  present ;  and  all  notes  and  bills  discounted  shall  be 
entered  in  a  book,  to  be  called  the  Credit  Book,  in  such  manner  as  to 
discover  to  the  board,  at  one  view,  on  each  discount  day,  the  amount  of 
which  any  person  is  discounter,  or  is  indebted  to  the  office,  either  as 
payer  or  as  endorser. 

ART.  17.  On  every  discount  day,  the  name  of  every  person  who  shall 
have  overdrawn  the  office  since  the  last  discount  day  shall  be  reported 
to  the  board ;  and  no  person  while  he  remains  an  over-drawer,  shall 
have  any  note  or  bill  discounted  by  the  offices.  And  in  no  instance  will 
this  bank  give  a  release  or  discharge  to  any  debtor  when  the  debt 
arises  from  an  overdraft.  And  every  officer  who  shall  knowingly  suffer 
an  overdraft  to  be  made  on  the  office,  without  communicating  it  to  the 
president  and  cashier,  shall  be  dismissed  from  the  service  of  the  office. 

ART.  21.  A  committee  on  the  state  of  the  office,  shall  be  appointed 
by  ballot  every  three  months,  to  examine  and  count  the  discounted 
notes,  and  compare  the  amount  thereof  with  the  balance  of  the  amount 
of  bills  discounted  in  the  general  ledger,  they  shall  also  count  the  cash, 
and  examine  the  evidences  of  the  other  property  of  the  bank,  and  make 
an  inventory  of  the  same  to  be  compared  with  the  books  in  order  to 
ascertain  their  agreement,  and  make  report  to  the  board. 

ART.  22.  The  Presidents  and  Cashiers  of  offices,  shall  take,  and  sub- 
scribe an  oath,  or  affirmation  to  the  following  effect,  to  wit :  I 

do  swear  (or  affirm)  that  I  will,  to  the  best  of  my  knowledge  and  abilities, 
perform  the  duties  assigned  to,  and  the  trust  reposed  in  me  as  — 
of  the  office  of  discount  and  deposit  of  the  Bank  of  the  United  States. 

ART.  24.  The  offices  of  discount  and  deposite  shall  receive  in  pay- 
ment of  the  revenue  of  the  United  States  the  notes  of  such  State  banks 
as  redeemed  [?]  their  engagements  with  specie,  and  provided  they  are 
the  notes  of  banks  located  in  the  city  or  place  where  the  office  receiving 
them  is  established.  And  also  the  notes  of  such  other  banks,  as  a 
special  deposite  on  behalf  of  the  Government,  as  the  Secretary  of  the 
Treasury  may  require. 

ART.  25.  The  offices  of  discount  and  deposite  shall,  at  least  once 
every  week,  settle  with  the  State  banks  for  their  notes  received  in  pay- 
ment of  the  revenue,  or  for  the  engagements  of  individuals  to  the  bank, 
so  as  to  prevent  the  balance  due  to  the  office  from  swelling  to  an  incon- 
venient amount. 

ART.  27.  The  respective  offices  shall,  once  in  every  week,  make  out 
and  transmit  to  the  directors  of  the  Bank  of  the  United  States,  a  distinct 
abstract  of  the  state  of  their  funds ;  which  abstract  shall  ascertain  the 
amounts  of  the  debts  and  credits  of  the  office,  amount  of  notes  issued 


APPENDICES 


511 


by  the  office,  and  then  in  circulation,  the  amount  of  cash  on  hand ;  and 
shall  likewise  distinguish  in  the  account  of  cash  on  hand,  how  much 
thereof  is  in  specie,  and  how  much  in  the  several  kinds  of  bank  notes,  desig- 
nating the  notes  of  the  parent  bank,  and  those  of  each  office  particularly. 
ART.  31.  The  directors  of  the  offices  shall  be  empowered  to  form 
and  establish  all  other  rules  and  regulations  for  the  interior  manage- 
ment of  the  offices ;  provided,  the  same  be  not  repugnant  to  law,  or  to 
the  rules  and  regulations  of  the  Bank  of  the  United  States,  or  the  reso- 
lutions of  the  directors  thereof. 


APPENDIX  XI 


PRICES  OF  UNITED  STATES  BANK 


1818 


September  7 
October  5 
November  2 
December  7 


1  d. 

1  d. 

1  d. 

1  d. 


1819 

January-February 1     d. 

March-April %d. 

May %  to  %d. 

June %d. 

July-December %d. 

1820 

January-December %d. 

Boston  Branch 

September-October 4.     d. 

November-December 2     d. 

Middletown  Branch 

September-December 2     d. 

1821 
January-December J^d. 


BRANCH  NOTES  AT  PHILADELPHIA' 

1821 

Boston  and  New  Hampshire 
Branches 

January-December 2     d, 

1822 
January-December %d. 

Boston  and  New  Hampshire 
Branches 

January-May 2     d, 

June-December %d, 

1823 

January-February %d. 

March-May %d. 

June-December . .  l£d. 


1824 

January-June %d. 

July-September par 

Oct.-Nov.,  small,  par;  large,  J^d. 

December par 


1 8.  D.  457, 25th  Cong.,  2d  Sess.,  pp.  10-29. 


512   THE  SECOND  BANK  OF  THE  UNITED  STATES 

APPENDIX  XII 

YEARLY  AVERAGE  CIRCULATION 


1817.. 

....$3,658,000 

1824 

$  5,791,000 

1831 

.$19,035,000 

1818.... 

....  8,461,000 

1825.... 

.  .  .  8,825,000 

1832.... 

.  19,989,000 

1819.... 

....  4,809,000 

1826.... 

.  .  .  9,635,000 

1833.... 

.  18,636,000 

1820.... 

4,491,000 

1827  

.  .  .  9,780,000 

1834  . 

.  .  16,790,000 

1821.... 

5,654,000 

1828  ... 

...  11,067,000 

1835.  . 

22,340,000 

1822.... 

5,306,000 

1829  .... 

.  ..  13,102,000 

1836... 

..  20,958,000 

1823.... 

....  4,487,000 

1830.... 

...  15,067,000 

The  average  for  1817  is  of  little  value  as  an  average,  for  the  bank  began  opera- 
tions in  this  year,  and  as  a  consequence  its  dealings  were  too  meager  until  late  in 
the  year  to  make  a  real  average. 

In  1836  only  two  months,  January  and  February,  are  averaged.  After  these 
months  the  bank  was  a  state  institution. 


APPENDIX  XIII 

YEARLY  AVERAGE  DEPOSITS 


1817.. 

.  .$13,413,000 

1824.. 

..$12,779,000 

1831.. 

.  $17,220,000 

1818... 

...  11,173,000 

1825... 

...  12,736,000 

1832... 

.  .  .  19,593,000 

1819... 

.  .  .  5,800,000 

1826... 

...  13,385,000 

1833... 

.  .  .  16,730,000 

1820... 

.  .  .  6,693,000 

1827... 

...  14,342,000 

1834... 

.  .  .  9,496,000 

1821... 

6,917,000 

1828... 

...  15,427,000 

1835... 

.  .  .  9,494,000 

1822  .. 

.  7,491,000 

1829 

15,516,000 

1836... 

.  .  .  4,057,000 

1823... 

...  11,075,000 

1830... 

...  16,059,000 

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Calhoun,  John  Caldwell.  The  Works  of  John  C.  Calhoun.  [Edited 
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Clark,  M.  St.  Clair,  and  Hall,  D.  A.  Legislative  and  Documentary 
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Dallas,  George  Mifflin.  Life  and  Writings  of  Alexander  James 
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[Duane,  William  John.]  Narrative  and  Correspondence  concerning 
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Elliot,  Jonathan.  Funding  System  of  the  United  States  and  Great 
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Gallatin,  Albert.  The  Writings  of  Albert  Gallatin.  Edited  by 
Henry  Adams.  3  vols.  Philadelphia,  Lippincott,  1879. 

Goddard,  Thomas  H.  A  General  History  of  the  Most  Prominent 
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Gouge,  William  M.  A  Short  History  of  Paper  Money  and  Bank- 
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Effects  on  Morals  and  Happiness Philadelphia,  T.  W. 

Ustick,  1833. 

Hamilton,  James  Alexander.  Reminiscences  of  James  A.  Hamil- 
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Hone,  Philip.  The  Diary  of  Philip  Hone,  1828-51.  Edited,  with 
an  introduction,  by  Bayard  Tuckerman.  2  vols.  New  York, 
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Hunt,  Charles  Haven.  Life  of  Edward  Livingston.  New  York, 
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Ingersoll,  Charles  Jared.  Historical  Sketch  of  the  Second  War 
between  the  United  States  of  America  and  Great  Britain.  2 
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Kearny,  John  Watts.  A  Sketch  of  American  Finances,  1789- 
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Kendall,  Amos.  Autobiography  of  Amos  Kendall.  Edited  by  his 
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King,  Rufus.  The  Life  and  Correspondence  of  Ruf us  King.  Edited 
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Mackenzie,  William  Lyon.  The  Lives  and  Opinions  of  Benj. 
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Madison,  James.  Selections  from  the  Private  Correspondence  of 
James  Madison,  from  1813  to  1836.  Washington,  published 
by  J.  C.  McGuire  for  private  distribution,  1853. 

Mayo,  Robert.  Political  Sketches  of  Eight  Years  in  Washington. 
Baltimore,  Fielding  Lucas,  Jr.,  1839. 

Meigs,  William  M.  The  Life  of  Charles  Jared  Ingersoll.  Phila- 
delphia, Lippincott,  1897. 

Miller,  Stephen  F.  The  Bench  and  Bar  of  Georgia;  Memoirs  and 
Sketches.  2  vols.  Philadelphia,  Lippincott,  1858. 

Moulton,  R.  K.  Legislative  and  Documentary  History  of  the  Banks 
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CONTRIBUTIONS  TO  PERIODICALS 

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can Review,  Vol.  XXXII,  January,  1831. 

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Conrad,  Robert  T.  Sketch  of  Nicholas  Biddle.  National  Portrait 
Gallery  of  Distinguished  Americans,  Vol.  Ill,  p.  12.  3  vols. 
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Cooper,  Thomas.    Southern  Review  for  November,  1831. 

Dawson,  Henry  Barton.  Historical  Magazine,  2d  Series,  Vol.  IX, 
January,  1871. 

Gallatin,  Albert.  Considerations  on  the  Currency  and  Banking 
System  of  the  United  States.  American  Quarterly  Review, 
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Haskell,  Louisa  P.  Langdon  Cheves  and  the  United  States  Bank. 
Report  of  American  Historical  Association,  1896,  Vol.  I. 
Washington,  Government  Printing  Office,  1897. 

Jackson,  Andrew.  Some  Letters  of  Andrew  Jackson.  American 
Historical  Magazine,  Vol.  IV.  Nashville,  1899. 

Jackson  Andrew.  Some  Letters  of  Andrew  Jackson.  [Ford  MSS.] 
Bulletin  of  the  New  York  Public  Library,  Vol.  IV,  No.  9,  Sep- 
tember, 1900. 

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the  United  States.  Edited  by  John  J.  Lalor.  3  vols.  Chicago, 
Rand,  McNally  &  Co.,  1881-84.  Vol.  I,  pp.  204-22. 

North  American  Review,  April,  1831. 

Perkins,  T.  H.  Branch  Bank  of  the  United  States  at  Boston,  1824 
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account  of  the  laying  of  the  corner  stone  and  a  description  of 
the  edifice. 

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tian Examiner,  Vol.  XXXI,  p.  1, 1842. 

DECISIONS   OF   THE   COURTS 

Bank  of  the  United  States  v.  Bank  of  the  State  of  Georgia,  10 

Wheaton,  333. 

Bank  of  the  United  States  v.  Brent,  2  Cranch  C.  Ct.,  696. 
Bank  of  the  United  States  v.  Dunn,  6  Peters,  51. 
Bank  of  the  United  States  v.  Leathers,  8  B.  Monroe,  126. 
Bank  of  the  United  States  v.  Lyman,  1  Blatchford,  297. 
Bank  of  the  United  States  v.  McKenzie,  2  Brockenbrough,  393. 
Bank  of  the  United  States  v.  Magill,  1  Paine,  661. 
Bank  of  the  United  States  v.  Martin,  5  Peters,  479. 
Bank  of  the  United  States  v.  Northumberland,  Union  and  Columbia 

Bank,  4  Washington,  108;  4  Conn.,  333. 
Bank  of  the  United  States  v.  Norton,  3  A.  K.  Marshall,  422. 
Bank  of  the  United  States  v.  Norvell,  2  A.  K.  Marshall,  101. 
Bank  of  the  United  States  v.  Owens,  2  Peters,  527. 
Bank  of  the  United  States  v.  Planters'  Bank  of  Georgia,  9  Wheaton, 

904. 
Bank  of  the  United  States  v.  Roberts,  4  Conn.,  323;  2  Federal  Cases, 

728,  729. 

Bank  of  the  United  States  v.  Sill,  5  Conn.,  106. 
Bank  of  the  United  States  v.  Stearns,  15  Wendell,  314. 
Bank  of  the  United  States  v.  United  States,  2  Howard,  711  and 

appendix. 

Bank  of  the  United  States  v.  Waggener,  9  Peters,  378. 
Bulow  v.  City  Council,  1  Nott  &  M.,  527. 

City  of  Louisville  v.  Bank  of  the  United  States,  3  B.  Monroe,  142. 
Commonwealth  v.  Morrison,  2  A.  K.  Marshall,  75. 
Findlay's  Executors  v.  Bank  of  the  United  States,  2  McLean,  44. 
Fleckner  v.  Bank  of  the  United  States,  8  Wheaton,  338. 


518  THE  SECOND  BANK  OP  THE  UNITED  STATES 

Ludlow  v.  Kidd,  3  Ohio,  48. 

McCulloch  v.  The  State  of  Maryland,  4  Wheaton,  316. 

Magill  v.  Parsons,  4  Conn.,  317. 

Martin  v.  Bank  of  the  United  States,  4  Washington,  253. 

Osborn  v.  Bank  of  the  United  States,  9  Wheaton,  738. 

Sill  v.  Bank  of  the  United  States,  5  Conn.,  102. 

Smith  v.  Frye,  5  Cranch  C.  Ct.,  515. 

State  ex  rel.  Berney  v.  Collector,  2  Bailey,  654. 

State  v.  Buchanan,  5  Har.  &  J.,  362. 

State  v.  Common  Pleas,  3  Ohio,  49. 

State  v.  Tutt,  2  Bailey,  44. 

United  States  v.  Bank  of  the  United  States,  5  Howard,  382. 

United  States  v.  Brewster,  7  Peters,  164. 

United  States  v.  Hinman,  1  Baldwin,  292. 

United  States  v.  Noble,  5  Cranch  C.  Ct.,  371. 

United  States  v.  Shellmire,  1  Baldwin,  370. 

United  States  v.  Shire,  1  Baldwin,  510. 

United  States  v.  Turner,  7  Peters,  132. 

GOVERNMENT   DOCUMENTS 

Annals  of  Congress. 
Congressional  Debates. 
Congressional  Globe. 
House  Executive  Documents: 

No.  63,  21st  Cong.,  2d  Sess.     Monthly  reports  of  the  bank  for 

1830. 

No.  3, 22d  Cong.,  2d  Sess. 
No.  8,  22d  Cong.,  2d  Sess.  (identical  with  Senate  Document  4, 

22d  Cong.,  2d  Sess.). 
No.  98,  22d  Cong.,  1st  Sess. 
No.  147,  22d  Cong.,  1st  Sess. 
No.   2,   23d   Cong.,   1st  Sess.      Reports    of   the  government 

directors  to  President  Jackson. 
No.  12,  23d  Cong.,  1st  Sess.     Reports  of  the  government 

directors  to  President  Jackson. 
No.  78,  23d  Cong.,  1st  Sess. 
No.  320,  23d  Cong.,  1st  Sess. 
No.  479,  23d  Cong.,  1st  Sess. 

No.  523,  23d  Cong.,  1st  Sess.    Monthly  reports  of  the  bank 
from  January,  1831,  to  June,  1834. 


BIBLIOGRAPHY  519 


Vols.  Ill,  IV,  and  V,  passim,  23d  Cong.,  1st  Sess. 

No.  21, 23d  Cong.,  2d  Sess.    The  French  bill  and  branch  drafts. 

No.  42,  23d  Cong.,  2d  Sess.    Branch  drafts. 

No.  45,  23d  Cong.,  2d  Sess.  Letter  from  the  secretary  of  the 
treasury  in  relation  to  the  official  proceedings  of  the  govern- 
ment directors  of  the  Bank  of  the  United  States,  December 
29, 1834. 

No.  46,  23d  Cong.,  2d  Sess. 

No.  71,  23d  Cong.,  2d  Sess.  Domestic  exchange  and  rates  of 
collection  by  the  Bank  of  the  United  States  and  its  branches. 

No.  79,  23d  Cong.,  2d  Sess.  Circular  letter  of  the  secretary  of 
the  treasury  stopping  receipt  of  branch  drafts  after  1834. 

No.  204,  24th  Cong.,  1st  Sess.,  pp.  2-13.  Monthly  reports  of 
the  bank,  February  and  March,  1836. 

No.  118,  24th  Cong.,  2d  Sess.  Valuable  information  on  the 
bank  in  1835-1836. 

House  Journals. 

House  Reports: 

No.  92, 15th  Cong.,  2d  Sess.  Investigation,  November  25, 1818, 
by  the  committee  of  the  House.  Pp.  493.  See  also  folio  State 
Papers. 

No.  358,  21st  Cong.,  1st  Sess.    McDuffie's  report. 

No.  312,  22d  Cong.,  1st  Sess. 

No.  460,  22d  Cong.,  1st  Sess.,  April  30, 1832.  Investigation  of 
1832  by  Mr.  Clayton,  on  behalf  of  the  committee  of  the 
House.  Washington,  1832.  Pp.  568.  Abstract  of  monthly 
reports,  January,  1829-May,  1832,  pp.  331  S. 

No.  121,  22d  Cong.,  2d  Sess. 

No.  263,  23d  Cong.,  1st  Sess.    Polk's  report. 

No.  313,  23d  Cong.,  1st  Sess. 

No.  481  23d  Cong.,  1st  Sess. 

No.  272,  24th  Cong.,  2d  Sess. 

No.  306,  24th  Cong.,  2d  Sess. 

Reports  on  the  Finances,  Vols.  I  and  II. 

Senate  Documents: 

No.  193,  20th  Cong.,  1st  Sess. 
No.  195,  20th  Cong.,  1st  Sess. 
No.  7,  20th  Cong.,  2d  Sess. 
No.  44,  20th  Cong.,  2d  Sess. 


520  THE  SECOND  BANK  OP  THE  UNITED  STATES 

No.  92,  20th  Cong.,  2d  Sess. 

No.   104,  21st  Cong.,  2d  Sess.    Report  on  the  finances  by 

Samuel  Smith,  1829. 
No.  31,  22d  Cong.,  1st  Sess. 
No.  50,  22d  Cong.,  1st  Sess. 
No.  79,  22d  Cong.,  1st  Sess. 
No.  98,  22d  Cong.,  1st  Sess. 
No.  4,  22d  Cong.,  2d  Sess.  (Identical  with  House  Executive 

Document  8,  22d  Cong.,  2d  Sess.) 
No.  82,  22d  Cong.,  2d  Sess. 
No.  2,  23d  Cong.,  1st  Sess. 
No.  16,  23d  Cong.,  1st  Sess. 
No.  17,  23d  Cong.,  1st  Sess. 
No.  24,  23d  Cong.,  1st  Sess. 
No.  71,  23d  Cong.,  1st  Sess. 
No.  92,  23d  Cong.,  1st  Sess. 
No.  238,  23d  Cong.;  1st  Sess. 
No.  333,  23d  Cong.,  1st  Sess. 
No.  2,  23d  Cong.,  2d  Sess.    Correspondence  between  the  bank 

and  the  Treasury  Department  on  the  French  bill. 
No.  8,  23d  Cong.,  2d  Sess.    Monthly  statements  of  the  bank, 

June-December,  1834. 
No.  13,  23d  Cong.,  2d  Sess.    Report  of  the  secretary  of  the 

treasury  on  present  system  of  keeping  and  disbursing  the 

public  money  in  comparison  with  the  former  agency  of  the 

Bank  of  the  United  States,  December  15,  1834. 
No.  17,  23d  Cong.,  2d  Sess.    Report  of  the  Committee  on 

Finance,  with  documents,  December  18,  1834.     8vo,  pp.  1- 

340  and  1-9.    Abstract  of  monthly  reports,  1818-34  (October), 

pp.  208-24. 
No.  312,  24th  Cong.,  1st  Sess.    Monthly  reports  of  the  bank 

October,  1835-February,  1836. 
No.  392,  24th  Cong.,  1st  Sess. 
No.  2,  24th  Cong.,  2d  Sess. 
No.  201,  24th  Cong.,  2d  Sess. 
No.  208,  24th  Cong.,  2d  Sess. 
No.  128,  25th  Cong.,  2d  Sess.    Monthly  reports  of  the  bank 

January-October,  1835,  pp.  1-61.     Also  abstract,  1817-36 

pp.  208-11. 
No.  230.  25th  Cong.,  2d  Sess. 


BIBLIOGRAPHY  521 

No.  457,  25th  Cong.,  2d  Sess.    Prices  of  state-bank  notes  at 

Philadelphia,  1817-37. 
No.  78,  25th  Cong.,  3d  Sess. 

No.  142,  25th  Cong.,  3d  Sess.    Average  circulation  of  the  bank. 
No.  180,  26th  Cong.,  2d  Sess. 
No.  22,  27th  Cong.,  1st  Sess. 

Senate  Journals. 

State  Papers,  folio  edition: 

Finance,  Vols.  Ill,  IV,  V,  passim.    The  most  important  con- 
tents are  the  following: 
Correspondence  with  the  Treasury  Department,  Vol.  IV,  pp. 

495-1077. 
Memorial  of  the  Bank  of  the  United  States,  December  7,  1820, 

Vol.  Ill,  pp.  586  ff. 
Monthly  reports  of  the  bank:  for  1817,  Vol.  Ill,  pp.  319  ff., 

345  ff.;  for  1824, 1825, 1826, 1827,  Vol.  IV,  pp.  183  ff.,  321  ff., 

548  ff .,  902  ff. 
Keport  of  the  Committee  of  the  Bank  of  the  United  States, 

September  25, 1819,  Vol.  IV,  pp.  906  ff. 
Report  of  the  Investigating  Committee  of  1819,  Vol.  Ill,  pp. 

306-91. 
State  Papers,  octavo  edition: 

No.  138,  15th  Cong.,  2d  Sess.    Memorial  of  William  Gray  and 

others,  1819. 
No.  93,  20th  Cong.,  2d  Sess.    Monthly  reports  of  the  bank  for 

1828. 
No.  13,  21st  Cong.,  1st  Sess.    Monthly  reports  of  the  bank  for 

1829. 

PENNSYLVANIA  DOCUMENTS 

Pennsylvania  House  Committee.  Report  of  the  Committee  on 
Banks  in  the  House  of  Representatives  of  Pennsylvania,  etc., 
by  M.  Learning,  chairman.  Harrisburg,  1833. 

Pennsylvania  Senate  Document,  July  12, 1842.  Report  of  the  Joint 
Committee  of  Investigation,  Appointed  by  the  Legislature  of 
Pennsylvania,  to  Investigate  Whether  Corrupt  Means  Had 
Been  Used  to  Procure  Legislation  Favorable  to  the  Banks 
from  1836  to  1841.  Harrisburg,  1842. 

Pennsylvania  Senate  Report.  Substitute  for  the  Report  of  the 
Committee  of  the  Senate  of  Pennsylvania,  on  the  Memorial  of 


522   THE  SECOND  BANK  OF  THE  UNITED  STATES 

Sundry  Banks  of  the  City  and  County  of  Philadelphia,  etc., 
made  by  Mr.  Petrickin,  February  4, 1834.    Harrisburg,  1834. 

MANUSCRIPT   MATERIAL 

President's  Letter  Books,  Vols.  I-V.  The  official  letter  books  of 
President  Nicholas  Biddle.  Referred  to  in  the  notes  by  the 
initials  P.  L.  B. 

The  Biddle  Papers.  Letters  to  and  from  Nicholas  Biddle.  Referred 
to  in  the  notes  by  the  initials  B.  P. 

NEWSPAPERS 

Blair,  Francis  Preston.    Extra  Globe.    Vol.  I.    June  28, 1834,  to 

January  17,  1835.     26  numbers.    Washington. 
Blair,  Francis  Preston.    The  Globe.    Washington,  1831-36. 
Gales,  Joseph,  and  Seaton,  William.    The  National  Intelligencer. 

Washington,  1813-36. 

Niles,  Hezekiah.    The  Weekly  Register.    Baltimore,  1813-41. 
Noah,  M.  M.,  and  Webb,  J.  W.    The  Courier  and  Enquirer.    New 

York  [consolidated  in  1831],  1828-36. 
Walsh,  Robert.    The  National  Gazette.    Philadelphia,  1820-41. 

[This  was  the  organ  of  the  bank.] 

PAMPHLETS 

Adams,  Charles  Francis.  Further  Reflections  upon  the  State  of 
the  Currency  in  the  United  States.  Boston,  Ticknor,  1837. 

Aegles  (pseudo.).  [Watkins,  Dr.  Tobias.]  Letters  of  Aegles  Ad- 
dressed to  the  Hon.  John  C.  Spencer.  Baltimore,  John  D. 
Toy,  1819. 

Anonymous.  A  View  of  the  Principal  Causes  That  Have  Pro- 
duced the  Present  Extraordinary  Advance  of  the  Stock  of  the 
United  States  Bank.  [Philadelphia,  1818.] 

Anonymous.  Brief  Review  of  the  Origin,  Progress,  and  Admin- 
istration of  the  Bank  of  the  United  States.  Philadelphia,  1819. 

Anonymous.  Conclusions  Which  Tend  to  Prove  that  the  United 
States  Bank  is  Necessary.  New  Haven,  1828. 

Anonymous.  Observations  on  the  Bank  of  the  United  States. 
Annapolis,  Jonas  Green,  printer,  1819. 

Anonymous.  Outline  of  a  Plan  for  a  National  Bank,  with  Inci- 
dental Remarks  on  the  Bank  of  the  United  States.  New  York, 
1833. 


BIBLIOGRAPHY  523 


Anonymous.  Reflections  upon  the  Present  State  of  the  Currency 
in  the  United  States.  Boston,  Ezra  Lincoln,  1837. 

Anonymous.  Remarks  upon  Mr.  Appleton's  Remarks  on  Currency 
and  Banking.  By  a  disinterested  witness.  Boston,  Eastburn's 
Press,  1841. 

Anonymous.  Report  of  the  Bank  of  the  United  States,  September, 
1831.  Philadelphia,  1831.  8vo,  pp.  31. 

Anonymous.    Review  of  the  Veto. 

Anonymous.  The  Conduct  of  the  Administration.  Reprinted  from 
the  Boston  Daily  Advertiser  and  Patriot.  Boston,  1832. 

Appleton,  Nathan.  Appleton  on  Currency  and  Banking.  3d  edi- 
tion. Boston,  Eastburn's  Press,  1857. 

Aristides  (pseudo.).  [McKenney,  Thos.  L.]  Essays  on  the  Spirit  of 
Jacksonism  as  Exemplified  in  its  Deadly  Hostility  to  the  Bank 
of  the  United  States.  Philadelphia,  Jesper  Harding,  1835. 

Baker,  Henry  F.  Banks  and  Banking  in  the  United  States.  Part  I. 
Boston,  Ticknor,  Reed  &  Fields,  1853.  Part  II.  Cincinnati, 
H.  W.  Derby,  1854. 

Bank  of  Maryland  Conspiracy  as  Developed  in  the  Report  to  the 
Creditors,  by  Thomas  Ellicott,  Trustee  of  Said  Bank.  Phila- 
delphia, 1839. 

Biddle,  Nicholas.  Letters  to  John  M.  Clayton,  April  8  to  April 
25, 1841.  Philadelphia,  1841. 

Biddle,  Nicholas.  Two  Letters  ....  Embracing  a  History  of  the 
Re-charter  of  the  Bank  of  the  United  States,  and  a  View  of  the 
Present  Condition  of  the  Currency.  London,  1837. 

Bollman,  Eric.  Plan  of  an  Improved  System  of  the  Money  Con- 
cerns of  the  Union.  Philadelphia,  January,  1816. 

Bronson,  Isaac.  Inquiry  into  the  Causes  of  the  Present  State  of 
the  Circulating  Medium.  Philadelphia,  August,  1815. 

Carey,  Henry  C.  Answers  to  the  Questions:  What  Constitutes 
Currency?  What  are  the  Causes  of  Unsteadiness  of  the  Cur- 
rency? and  What  is  the  Remedy?  Philadelphia,  Lea  & 
Blanchard,  1840. 

Carey,  Henry  C.  The  Credit  System  in  France,  Great  Britain  and 
the  United  States.  Philadelphia,  Carey,  Lea  &  Blanchard, 
1838. 

Carey,  Mathew.  Letters  to  the  Directors  of  the  Banks.  March, 
1816. 

[Cheves,  Langdon.]    Exposition  of  the  Affairs  of  the  Bank  during 


524  THE  SECOND  BANK  OP  THE  UNITED  STATES 

the  Presidency  of  Langdon  Cheves.  Preceded  by  a  Report  of 
the  Condition  of  the  Bank  of  the  United  States  by  the  Com- 
mittee of  Inspection  and  Investigation  ....  1st  October,  1822. 
Adopted  by  the  stockholders.  Philadelphia,  William  Fry,  1822. 

Clibborn,  Edward.  An  Outline  of  the  American  Debit  or  Banking 
System.  London,  1837. 

Degrand,  P.  P.  F.  An  Address  to  the  People  of  the  United  States. 
[Boston,  1841.] 

Gallatin,  Albert.  Considerations  on  the  Currency  and  Banking 
System  of  the  United  States.  Published,  with  additions  and 
corrections,  from  the  American  Quarterly  Review.  Philadel- 
phia, Carey  &  Lea,  1831.  Also  in  Gallatin's  Writings,  Vol.  III. 

Gallatin,  Albert,  and  others.  Report  of  the  "  Union  Committee  " 
appointed  by  the  meeting  of  the  signers  of  the  memorial  to 
Congress,  held  on  February  11,  1834.  New  York,  1834. 

[Gordon,  Thomas  F.]  The  War  on  the  Bank  of  the  United  States. 
Philadelphia,  Key  &  Biddle,  1834. 

Gouge,  William  M.  An  Inquiry  into  the  Expediency  of  Dispens- 
ing with  Bank  Agency  and  Bank  Paper  in  the  Fiscal  Concerns 
of  the  United  States.  Philadelphia,  Stavely,  1837. 

Government  Directors.  The  Memorial  of  Henry  D.  Gilpin,  John 
T.  Sullivan,  and  Peter  Wager,  of  Pennsylvania,  and  Hugh 
McElderry,  of  Maryland,  Directors  of  the  Bank  of  the  United 
States,  Appointed  by  the  President,  by  and  with  the  Advice 
and  Consent  of  the  Senate.  1841. 

[Henshaw,  David.]  Remarks  upon  the  Bank  of  the  United  States. 
By  a  Merchant.  Boston,  True  &  Greene,  1831. 

Hildreth,  Richard.  Letter  to  Governor  Morton  on  Banking  and  the 
Currency.  Boston,  Kidder  &  Wright,  1840. 

Judicial  Decisions  upon  the  Cases  of  Habeas  Corpus,  Brought  by 
the  Late  Officers  of  the  Bank  of  the  United  States.  Philadel- 
phia, J.  Perry,  1842. 

Publius  (pseudo.).  Remarks  on  the  Currency  of  the  United  States 
and  Present  State  and  Future  Prospects  of  the  Country.  New 
York,  Wiley  &  Putnam,  1840. 

Report  of  a  Committee  of  Directors  of  the  Bank  of  the  United 
States.  [Philadelphia,  1833.]  Answer  to  the  president's  paper 
of  the  18th  September. 

Report  of  the  Bank  of  the  United  States  to  the  Committee  of  Ways 
and  Means  of  the  House  of  Representatives,  January  28,  1833. 


BIBLIOGRAPHY  525 


Report  of  the  Committee  of  Investigation,  appointed  at  the  meet- 
ing of  the  stockholders  of  the  Bank  of  the  United  States,  Janu- 
ary 4, 1841.  Philadelphia,  1841. 

Report  of  the  Joint  Committee  ....  of  the  General  Assembly  of 
Ohio,  on  the  Communication  of  the  Auditor  of  the  State  upon 
the  ....  Proceedings  of  the  Bank  of  the  United  States, 
against  the  Officers  of  State,  in  the  United  States  Circuit  Court. 
Concord,  [N.  H.],  1821. 

Report  of  the  Proceedings  of  the  Triennial  Meeting  of  the  Stock- 
holders of  the  Bank  of  the  United  States,  ....  First  Day 
of  September,  1828.  Philadelphia,  1828. 

Review  of  the  Report  of  the  Committee  of  Ways  and  Means;  and 
of  the  Message  of  the  President  of  the  United  States,  Relative 
to  the  United  States  Bank.  Philadelphia,  Carey  &  Lea,  1831. 

Royall,  William  L.  Andrew  Jackson  and  the  Bank  of  the  United 
States.  New  York,  Putnam,  1880.  Economic  Monograph, 
No.  XIX. 

Rules  and  Regulations  for  Conducting  the  Business  of  the  Bank. 
Philadelphia,  1816  [1833]. 

Rules  and  Regulations  for  the  Government  of  the  Offices  of  the 
Bank  of  the  United  States. 

Schreiner  and  others.  How  the  Honest  Vote  Won  against  Dis- 
honest Money.  Historical  Narrative  of  the  Money  Fight  between 
President  Andrew  Jackson  and  the  United  States  Bank.  Chi- 
cago, 1896. 

Smith,  Richard.  To  the  Stockholders  of  the  Bank  of  the  United 
States.  Washington,  August  26, 1825.  Defense  against  charges 
by  Weightman. 

Smith,  Thomas.  An  Essay  on  Currency  and  Banking.  Philadel- 
phia, Jesper  Harding,  1832. 

Swann,  Thomas.  To  the  Stockholders  of  the  Bank  of  the  United 
States.  Alexandria,  August  27, 1825,  Henry  Pittman,  printer. 

Van  Buren,  Martin.  Letter  from  Hon.  Martin  Van  Buren,  Vice- 
President  of  the  United  States,  Relative  to  the  Bank  of  the 
United  States,  with  an  Explanatory  Introduction.  London, 
John  Miller,  1836.  Part  of  letter  to  Sherrod  Williams. 

Virginian  [pseudo.].  Reflections  Excited  by  the  Present  State  of 
Banking  Operations  in  the  United  States.  By  a  Virginian. 
Washington,  1818. 

Virginian  [pseudo.].    The  Second  War  of  the  Revolution;  or,  The 


526  THE  SECOND  BANK  OF  THE  UNITED  STATES 

Great  Principles  Involved  in  the  Present  Controversy  between 
Parties.  By  a  Virginian.  Washington,  1839. 

Weightman,  Roger  C.  [Letter]  to  [W.  Duane]  a  Stockholder  in  the 
Bank.  Washington,  1825. 

Whitney,  Reuben  M.  Memorial  of  Reuben  M.  Whitney  to  the 
Honorable  House  of  Representatives,  United  States,  in  Relation 
to  the  Charges  Made  against  Him  before  the  Committee  of  Inves- 
tigation into  the  Affairs  of  the  Bank  of  the  United  States. 
Washington,  1832. 

Young,  S.    Considerations  on  the  Bank  of  the  United  States.    1832. 

STATUTES 

Statutes  at  Large.    Vols.  II,  III,  IV,  V,  passim. 

STATUTES    OF   STATES 

Acts  of  Kentucky  (Slaughter). 

Laws  of  Georgia  (Lamar,  1810-19)  (Dawson's  compilation).     . 

Laws  of  Maryland. 

Laws  of  Tennessee  (Scott's  ed.). 

Statutes  of  Ohio  (Chase). 


INDEX 


ADAMS.  JOHN  QUINCT:  convinced  of 
bank  s  imprudence,  145 ;  on  source  of 
Jackson's  nostility  to  bank,  173;_mem- 
ber  of  committee  of  investigation  in 
1832, 230 ;  on  advancing  salaries  to  con- 

fressmen.  253 ;  on  the  3  per  cents.,  273 ; 
reaks  friendship  with  Richard  Rush, 
355. 

AGENCIES,  42,  400. 

ALABAMA:  opposes  establishment  of 
branch,  165 ;  State  Bank  of,  441. 

ATTACKS  ON  .BANK  (see  Barbonr,  Ben- 
ton,  House,  Jackson,  Kendall,  Senate, 
Webb.) 

BAQEHOT,  WALTER,  430. 

BALANCES  WITH  STATE  BANKS,  35,  36, 51, 
57,  62,  63,  84-6,  97,  318,  322,  324,  445,  446. 

BALTIMOBE,  39,  40, 42. 

BALTIMORE  BRANCH  (see  Branches; 
Branches,  southern) :  established  in 
1816,  23:  frauds  at,  39,  45-50;  officers 
of,  42 ;  business  at,  in  1817-18;  43,  44 ; 
negligence  of  directors  of,  45,  46 ;  cur- 
tailments of  discounts,  51,  52,  150; 
taxed,  64 ;  capital  of,  1819, 55 ;  losses  at, 
66;  refuses  to  make  new  curtailment 
in  1819, 68, 69 ;  new  directors  and  officers 
of,  78 ;  no  permanent  capital  assigned 
to,  in  1823,  80 ;  Democrats  appointed 
directors  at,  246;  receipt  or  branch 
notes  at,  310-12 :  depreciation  of  notes 
of  other  branches  at,  417;  sold,  366, 
note  9,  368. 

BANK  :  attempts  to  establish  an  opposi- 
tion, 213,  289. 

BANK  BILLS  (see  Appendices  I  and  IV) :  in 
1813-16:  first,  7,  8;  second,  8,  9;  third, 
10, 11 ;  fourth,  14 ;  fifth,  15, 16 ;  sixth,  17  ; 
seventh,  18,  20 ;  in  1832,  235, 236 ;  in  1834, 
336-8. 

BANK:  commission  to  settle  affairs  of, 
373. 

BANK  DEMOCRATS  (see  Democrats). 

BANK  IN  POLITICS  (see  Charges  against 
the  bank,  and  the  individual  oilicos) : 
party  affiliations  of  directors  and 
officers,  174 ;  Democrats  appointed  on 
directorates,  181,  182,  186,  189,  200,  245- 
47 ;  destiny  of  bank  linked  with  that  of 
National  Republicans,  222. 

BANK  OF  THE  UNITED  STATES,  First,  1, 
18,  21. 

BANK  OP  THE  UNITED  STATES,  Second 
(see  Agencies,  Balances,  Bank  bills, 
Bank  in  politics,  Bank  war,  Biddle, 
Board,  Parent,  charges  against  Bank, 
Cheves,  Circulation,  Constitutionality, 
Curtailment,  Discounts,  Dividends, 


Exchange,  Government,  Relations  of 
bank  to,  Investigations  of.  Issues 
of,  Jones,  Loans  of,  Losses  of, 
Notes  of.  Panic,  Real  estate,  Sur- 

§lus  fund,  Suspended  debt.  Stock, 
tockholders) :  events  leading  to  es- 
tablishment of,  1-7;  plans  of,  10-12, 
14-18;  bill  to  charter,  passed,  21;  sub- 
scriptions to  capital  stock  of,  22 ;  in- 
ducements offered  state  banks  to 
resume  by,  25,  26,  454 ;  condition  of,  in 
1817-18,  28-37;  speculation  and  fraud 
at,  39 ;  condition  of,  in  1818-19,  57,  58, 
61,  68-70,  412,  413;  measures  to  save 
under  Cheves,  71-80;  trials  of  officers 
of,  78,  79 ;  state  of  business  at,  under 
Cheves,  80-82;  hatred  of,  84;  services 
of,  in  stringency  of  1825,  106-8;  busi- 
ness at,  in  1823-28,  110-13;  controls 
foreign  exchange  after  1827, 112 ;  bene- 
fit of,  to  the  West,  130-31 ;  success  of, 
by  July,  1831,  133;  expansion  of,  in 
1831-32,  136,  137,  142,  145,  147,  413,  414; 
embarrassments  of.  in  1831-32,  146-51, 
153, 160;  forces  tending  to  destroy,  164, 
165,  167;  forces  tending  to  conserve, 
167, 168 ;  hold  of,  on  popular  favor,  169, 
338,  339;  applies  for  re-charter,  221,223, 
224 ;  relations  of,  with  the  press,  256-67  ; 
contraction  of,  in  1833-34,  298,  299,  313 ; 
plans  to  re-charter  in  1834,  336-38; 
loses  popular  favor  in  1834,  338-40; 
r6sume  of  transactions  of,  in  1835,  359 ; 
state  of,  at  winding  up,  368,  371,  372; 
Bevan  becomes  president  of,  372,  373; 
exchange  committee  of,  259,  262,  273, 
279-84 ;  position  of  president  of,  under 
rules  of  1833,  274;  difficulties  of,  with 
state  banks,  27,  84-9,  382,  383,  446,  447, 
360;  center  of  a  single  banking  reserve 
system,  430,  432,  434 ;  only  guarantor  of 
specie  payments,  430,  431 ;  amount  of 
specie  reserve  held  by,  431,  432 ;  lack  of 
unity  between  state  banks  and,  433, 
434,  450 :  control  of  state  banks  by,  434- 
43,  451, 452 ;  method  of  improving  state- 
bank  paper  by,  435-8 ;  state-bank  notes 
received  byt  436, 455, 456 ;  difficulties  of, 
in  transferring  government  funds,  462, 
463 ;  specific  acts  of,  as  treasury  agent, 
464;  advantages  of,  to  business  com- 
munity, 472, 473 ;  no  evidence  of  corrup- 
tion at,  243,  252,  255 ;  becomes  Bank  of 
the  UnitedStates  of  Pennsylvania,  372. 

BANK  STOCK  (see  Stock,  bank). 

BANK  WAR  :  cause  of,  232 ;  beginning  of, 
242;  consequences  of  struggle  for  re- 
charter,  285;  and  removal  of  the  de- 
posits, 287-97;  and  French  indemnity 
bill,  299-302;  and  "transfer  drafts/' 
302-5 ;  and  pension  funds,  305-8 ;  and 
acts  of  government  directors,  308-10. 


527 


528  THE  SECOND  BANK  OP  THE  UNITED  STATES 


BANKING  HOUSES  :  sale  of,  369. 

BAEBOUR,  J.  S.,  17. 

HARBOUR,  P.  P.,  169. 

BARING  BROTHERS,  146,  270-72. 

BARRY,  WILLIAM  T.,  182, 295. 

BENNETT,  JAMES  GORDON,  257,  258. 

BENTON,  THOMAS  HART  :  presents  resolu- 
tions in  regard  to  government  deposits, 
170;  presents  resolutions  against  re- 
charter,  205 ;  attacks  branch  drafts,  120- 
22, 127-31 ;  resolves  on  investigation  of 
bank,  228,  229 ;  asserts  that  offices  are 
located  from  political  considerations, 
398;  complains  of  bank's  action  in 
Missouri,  442 :  and  removal  of  deposits, 
296 ;  asserts  that  bank  seeks  to  embar- 
rass state  banks,  310;  on  the  panic  of 
1833-34,  327,  349. 

BEVAN,  MATTHEW,  262,  347,  372,  373. 

BIDDLE,  NipnoLAa:  character,  93,  274, 
275;  appointed  government  director, 
93 ;  elected  president  of  bank,  93 ;  pol- 
icy, 94-7, 99-101, 383, 384, 405, 406:  evolves 
measures  for  control  of  branches,  101-5 
384;  conservatism  and  foresight  of, 
in  1825,  106J-8;  plan  of,  for  keeping 
branch  capitals  localized,  114, 115,  406 ; 
lays  branch-draft  proposition  before 
Binney  and  Webster,  117 ;  on  character 
of  branch  drafts,  125 ;  neglects  charges 
against  president  of  Portland  office, 
389 ;  on  bank's  duty  in  1828,  434;  reports 
success  of  his  measures,  July,  1831, 132; 
neglects  warnings  concerning  Cincin- 
nati branch,  391;  dismayed  at  New 
Orleans  bill  purchases,  157, 162 ;  opposes 
politics  at  boards,  171,  243-7,  250,  251, 
285;  repels  charges  against  branches, 
176,  178,  187,  188;  correspondence  of, 
with  Ingham,  172-9,  288;  correspond- 
ence of,  with  Lewis,  182,  184,  186-9, 
191,  200,  246,  247;  appoints  Democrats 
on  directorates,  181,  182,  186,  189,  200, 
245-7;  refuses  to  place  Democrats  on 
Louisville  board,  247 ;  submits  plan  for 
extinction  of  government  debt,  190, 191 ; 
interview  of,  with  Jackson,  192,  193; 
circulates  publications,  199,205 ;  secures 
treatise  from  Gallatin,  199,  200;  atti- 
tude of,  January  to  May,  1831,  206,  207 ; 
unites  with  Livingston  and  McLane 
to  secure  Jackson's  assent  to  re- 
charter,  208-10;  decides  to  apply  for 
re-charter,  214,  215,  217,  221;  loans  to 
Girard's  bank,  432,  433;  procures 
petitions  and  resolutions  for  re-charter, 
224 ;  willing  to  frame  bill  to  suit  Jaek- 
son,  225-7;  makes  last  attempt  to  se- 
cure Jackson's  assent,  232;  on  the  veto 
message,  241;  relations  of,  with  Bur- 
rows, Webb,  and  Noah,  258-64 ;  and  the 
3  per  cents.,  268-73;  denounces 
Jackson  and  McLane,  286,  287:  in- 
formed concerning  removal  of  depos- 
its, 292,  294;  opposed  to  government 
directors  in  1834,  309,  810 ;  insists  upon 
contraction  in  1833-34,  314,  316,  329-31, 
339;  supports  Webster's  plan  for  re- 
charter  in  1834,  336;  public  interest  in, 
353;  fortifies  bank  and  house,  356; 


dreads  renewal  of  western  bill  busi- 
ness, 395;  attitude  of,  toward  press. 
257,  258,  263-7;  permitted  to  expend 
funds  without  giving  vouchers,  265; 
proxies  held  by,  274 ;  appoints  commit- 
tees, 275;  loans  on  his  own  responsi- 
bility, 278;  controls  the  board,  279; 
management  of  suspended  debt  and 
real  estate  by,  400 ;  on  branch  notes, 
417,  418:  on  elasticity  of  currency,  423; 
on  bank  as  guarantor  of  specie  pay- 
ments, 430.  431 ;  on  power  of  bank  over 
state  banks,  438;  on  methods  of  im- 
proving currency,  450;  on  bank's  ad- 
vantages to  business  community,  472 
and  note  1;  charges  against,  by  di- 
rectors, 282,  283 ;  not  responsible  for 
downfall  of  bank,  284:  becomes  presi- 
dent of  Bank  of  the  United  States  of 
Pennsylvania,  372. 

BIDDLE,  T.  &  Co.,  273,  275,  277,  278. 

BILLS  RECEIVABLE,  281. 

BINNEY,  HORACE:  member  of  central 
board,  117,  118;  asserts  legality  of 
branch  drafts,  118 ;  agent  of  bank  dur- 
ing struggle  for  re-charter,  224,  251; 
upholds  exchange  committee,  2 79;  sup- 
ports Calhoun's  plan  for  re-charter  in 
1834,  336. 

BLAIR,  FRANCIS  PRESTON  :  charges  com- 
plicity of  branches  in  politics,  171 ;  ed- 
itor of  Globe,  199 ;  loans  to,  256 ;  urges 
removal  of  deposits,  287,  295 ;  founds 
Extra  Globe  in  1834,  355;  points  out 
reasons  for  bank's  overthrow,  357. 

BOARD,  PARENT  (see  Bank,  Biddle, 
Cheves,  Jones) :  political  complexion 
of,  22,  244;  invites  state  banks  to 
discuss  resumption,  24;  proposals  to 
state  banks,  in  1817,  26;  mismanage- 
ment by,  1817-18,  28-33,  35 ;  ignorance 
of,  in  1817  and  1832,  32t  395 ;  discounts 
stock  loans,  32 ;  resolutions  of  August, 
1818,  35,  41,  51,  52;  complicity  in  fraud 
and  speculation,  40-42:  establishes 
London  agency,  42 ;  collects  special 
deposits,  456,  457 ;  selects  state  banks 
as  treasury  agents,  457,  458 ;  and  stock 
loans  at  branches,  47,  48;  calls  for 
curtailment  in  1818,  51,  52,  62;  re- 
formed under  Cheves,  78j  82;  appeals 
to  Congress  for  modifications  of 
charter,  75,  91,  116,  117;  strengthened 
under  Biddle,  102;  takes  government 
loans,  73,  454,  471 ;  directors  of,  sit  at 
branch  boards  in  cities  where  resident, 
102, 103 ;  creates  assistant  cashiers,  104 ; 
permits  loans  on  six  months'  paper, 
109 ;  sells  forfeited  shares  of  bank  stock, 
109 ;  authorizes  issue  of  branch  drafts, 
119;  attempts  to  secure  state  stock, 
134;  extends  dealings  in  West  and 
Southwest,  134, 137 ;  orders  contraction 
in  1831, 146, 147 ;  applies  for  re-charter, 
221,  223,224;  circulates  veto  message, 
241 ;  policy  of,  unchanged  after  cam- 
paign of  1832,  285 ;  postponement  of  the 
8  per  cents.,  269-73,  473;  orders 
contraction  of  1833-34,  298,  299,  313 ;  re- 
port of  committee  of,  on  removal  of 
deposits,  316 ;  petitions  for  restoration 


INDEX 


529 


of  deposits,  335 ;  policy  in  1835,  360,  362, 
365,  367,  268;  petitions  for  settlement 
with  government  in  1837,  374;  redeems 
government  shares  in  bank,  372-75; 
charges  premium  on  bills  of  exchange, 
138;  grants  favors  to  congressmen, 
252-5;  contributes  to  public  improve- 
ments, 255;  small  attendance  of,  at 
meetings,  279;  authorizes  exchange 
committee  to  make  loans,  280,  281 ;  re- 
sponsible for  bank's  ruin,  281^1 ;  and 
the  branches,  376-9,  384,  387-95; 
takes  cognizance  of  charges  against 
branch  officials,  178,  389,  390 ;  attitude 
of,  toward  state  banks,  97, 440,  443, 446-8. 

BOSTON  BRANCH  (see  Branches,  eastern) : 
established  in  1816,  23;  discounts  at, 
34,  55, 125,  150;  capital,  in  1819,  56;  de- 
preciation of  notes,  416;  attempted 
removal  of  deposits  at,  202;  closing 
up,  367,  368. 

BRANCH  DRAFTS:  suggested  by  John 
Forsyth,  117 ;  Binney,  Webster,  and 
Wirt  affirm  legality  of,  118;  invented 
in  1827,  132;  issue  of,  authorized,  119; 
form  of,  119  and  note  2;  accepted  by 
treasury,  119;  decision  of  court  con- 
cerning, 120,  121;  status  of,  120^5, 
131 ;  convertibility  of,  125-7 ;  opinion 
of  W.  G.  Sumner  concerning,  125-7, 
130;  amount  issued,  128,  129;  branches 
issuing,  128, 129 ;  used  to  restrain  state- 
bank  issues,  441,  442;  forbidden  in  bill 
of  1832,  119;  receipt  by  government 
officials,  prohibited,  119,  452. 

BRANCHES  (see  Baltimore,  Boston, 
Branch  drafts,  Buffalo,  Burlington, 
Capitals  of  branches,  Charleston, 
Chillicothe,  Cincinnatij  Fayetteville, 
Hartford,  Issues,  Lexington,  Louis- 
ville, Middletown,  Mobile,  Nashville, 
Natchez,  New  Orleans,  New  York, 
Norfolk,  Notes  of  branches,  Philadel- 
phia, Pittsburg,  Portland,  Portsmouth, 
Providence,  Richmond,  St.  Louis,  Sa- 
vannah, Utica,  Washington) :  charter 
provisions  concerning,  376,  377 ;  estab- 
lishment of,  23,  379,  384,  385,  398; 
settlement  of  accounts  of,  30;  ad- 
ministration of,  under  Jones,  379,  380 ; 
taxed,  64,  65,  89,  90 ;  restrictions  on,  un- 
der Cheves,  76, 380, 381,  405,  426 ;  attempt 
to  reduce  number  or,  79;  control  of. 
Tinder  Biddle,  95-7,  101-5,  383-95; 
difficulties  of  management  of,  390,  392 ; 
directors  of,  how  chosen,  101, 102;  du- 
ties of  cashiers  of,  103,  104 ;  presidents 
of,  102,  384,  387  ;  oversight  by  assistant 
cashier  of  parent  board,  104,  384 ;  sus- 
pension of  rules  governing,  390;  or- 
dered to  curtail  in  1831,  146;  charges 
against,  171-3,  248-51 ;  contraction 
at,  1833-34,  316-22;  closed,  366,  367-9; 
remaining  unsold  in  1835,  367;  rules 
and  regulations  of,  377  and  Appendix 
X ;  cashiers  of,  103,  377,  378,  384 ;  knowl- 
edge of  central  board  concerning,  377, 
378 ;  under  influence  of  politics,  381, 382 ; 
reasons  for  establishment  of,  384,  385 ; 
authority  of  branch  boards  and  offi- 
cers, 885-7;  relative  importance  of, 
397,  398;  applications  for,  398,  399;  lo- 


cation of,  379,  399;  advantages  of 
branch  system.  376,  400-402,  422,  423, 
467 ;  defects  of  branch  system,  402,  403 ; 
remedies  for  defects  of  branch  system, 
403. 

BRANCHES,  eastern  (see  Boston.  Buffalo, 
Burlington,  Hartford,  Middletown, 
New  York,  Philadelphia.  Portland, 
Portsmouth.  Providence,  Utica) :  busi- 
ness of  nearly  destroyed  in  1818,  34,  55, 
56 ;  contract  in  1832,  148, 151 ;  receipt  of 
branch  notes  at,  1833,  310-12;  issues 
of,  409,  410. 

BRANCHES,  SOUTHERN  (see  Baltimore, 
Charleston,  Fayetteville,  _  Norfolk, 
Richmond,  Savannah,Washington) :  of- 
ficers and  boards  of,  incompetent  and 
disobedient,  32,  33,  35;  fail  to  reduce, 
52,  54, 148 ;  excessive  issues,  54 ;  capital 
in  1819,  55,  56 ;  directed  to  cease  issue  of 
notes,  70,  81,  82;  investigated  under 
Cheves,  79;  expansion  at,  in  1832.  147; 
directed  to  curtail,  in  1832, 147 ;  issues 
of,  34,  410-12. 

BRANCHES,  SOUTHWESTERN  (see  Mobile, 
Natchez,  New  Orleans) :  dealings  in  ex- 
change at,  142, 144 ;  directed  •  to  curtail 
in  1832, 147, 162;  issues  of,  410-12. 

BRANCHES,  WESTER_N  (see  Chillicothe, 
Cincinnati,  Lexington,  Louisville, 
Nashville,  Pittsburg,  St.  Louis) :  offi- 
cers and  boards  incompetent  and  dis- 
obedient, 32,  33,  35 ;  fail  to  reduce,  54 ; 
excessive  issues,  54 ;  capital  in  1819,  56 ; 
directed  to  cease  issue  of  notes,  70,  81, 
82, 404,  405,  415,  455 ;  permitted  to  issue 
five-dollar  notes,  75,  81 ;  investigated 
under  Cheves,  79;  dealings  in  ex- 
change, 142-4 ;  expansion  in  1832, 147 ; 
directed  to  curtail  in  1832,  147,  162; 
perilous  business  of,  395,  413;  issues 
of,  34,  411,  412. 

BRONSON,  ISAAC,  291. 

BUCHANAN,  JAMES  A. :  president  Balti 
more  office,  42;  director  of  parent 
board,  43;  speculates  in  stock,  40,  43, 
44;  fraudulent  transactions  of,  45-50; 
resigns,  78 ;  tried  for  conspiracy,  79. 

BUFFALO  BRANCH  (see  Branches,  east- 
ern): established,  384,  note  6;  closed, 
366, 

BURGESS,  TRISTRAM,  349. 

BURLINGTON  BRANCH  (see  Branches,  east- 
ern): established,  384,  note  5;  closed, 
366. 

BURROWS,  SILAS  E.,  224,  257-62. 

BUSINESS,  STATE  OF  (see  Trade  and  in- 
dustry) . 

BUTLER,  BENJAMIN  F.,  301. 

CABINET,  193,  207,  219,  295. 

CADWALADER,  THOMAS  :  on  Ingham  cor- 
respondence, 177;  bank's  agent  at 
Washington,  217-21 ;  on  the  veto,  238, 
240:  postponement  of  the  3  per  cents, 
and,  269-72. 

CALHOUN,  JOHN  C. :  suggests  establish- 
ment of  bank  in  District,  7  ;  member  of 
committee  on  bank,  8;  opposes  Dal- 


530  THE  SECOND  BANK  OP  THE  UNITED  STATES 


las's  plan,  11, 12, 15 ;  plan  for  a  hank, 
12;  member  of  Select  Committee  to 
consider  bank  bill,  13,  18;  Calhoun- 
Lowndes- Federalist  compromise,  15, 
16 ;  brings  in  bill  of  1816, 18 ;  opinion  of 
source  of  Jackson's  hostility  to  bank, 
113,173;  complains  of  political  activity 
of  Charleston  branch,  250;  supports 
bank  in  1834,338;  plan  for  re-charter 
in  1834,  336-8 ;  bitter  against  Jackson, 
349. 

CAMBEELENO,  C.  C.,  228. 

CAMPAIGN  OP  1832, 285. 

CAMPBELL,  GEORGE  W.,  1, 3, 4, 9. 

CAPITAL  OF  BANK  :  specie  part  of,  not  en- 
tirely paid,  41,  58,  59 ;  amount  of  gov- 
ernment stock  subscribed  to,  470 ;  shifts 
to  South  and  West  in  1818,  35,  55,  56,  74, 
404;  distribution  of,  56,  note  1;  80, 
note  5 ;  management  of,  under  Cheves, 

72,  73, 108 ;  assignment  of,  to  branches, 

73,  77,  80 ;  restored  by  January,  1821,  80 ; 
proportion  of  circulation  to,  407 ;  pro- 
portion of  loans  to,  432. 

CAPITALS  OF  BRANCHES  FIXED  :  deemed 
unnecessary  by  Jones,  30 ;  assigned,  73, 
77,  80;  measures  to  keep  fixed,  74-7, 
114, 115,  406. 

CAREY,  MATTHEW,  266. 
CASS,  LEWIS,  295,  306. 

CHARGES  AGAINST  THE  BANK  IN  1818-19, 
58-60 ;  of  using  bills  of  exchange  to  ex- 
tort usurious  rates,  138-40 ;  of  expand- 
ing and  contracting  from  political  mo- 
tives, 160,  note  2;  of  trying  to  secure 
Jackson's  defeat  in  1828, 171 ;  of  politi- 
cal action  at  the  branches,  248-51  j  of 
establishing  branches  from  political 
considerations,  398,  399;  of  corrupt  re- 
lations with  the  press,  256-67 ;  of  job- 
bing in  3  per  cent,  stock,  267-73 ;  by  R. 
M.  Whitney,  275-7 ;  of  granting  illegal 
powers  to  exchange  committee,  279- 
84;  in  Jackson's  "  paper,"  296,  297 ;  of 
seeking  to  embarrass  state  banks, 
310. 

CHARLESTON  BRANCH  (see  Branches, 
southern) :  established  in  1816, 23 ;  capi- 
tal of,  in  1819,56;  losses  at,  in  1819,  66; 
cannot  reduce,  150,  326, 393, 394 ;  charges 
of  political  activity,  171,  249,  250;  im- 
portance of,  397,  398 ;  and  the  Bank  of 
the  State  of  South  Carolina,  447 ;  closed, 
369,  note  9,  368. 

CHARTER  (see  Bank  bills,  Biddle,  Jack- 
son) :  passage  of,  in  1816,  21 ;  text  of, 
Appendix  I ;  provisions  of,  respecting 
bank's  relations  to  government,  453, 
465 ;  provisions  of,  respecting  branches, 
376, 277 ;  provisions  of,  respecting  issues, 
115,  404 ;  provisions  of,  respecting  rela- 
tions to  treasury,  288,  465;  provision 
of,  respecting  purchase  of  government 
stock,  267,.  268;  act  additional  to,  60; 
bank  petitions  for  modifications  in,  75, 
91, 116, 117 ;  provisions  of  bill  of  1832, 
232-8,  451;  nope  of  securing  new,  in 
1833-4,  329-31,  336-8,  346;  from  Penn- 
sylvania, 359,  367,  371,  372. 


CHTVES,  LANGDON:  speaker,  9;  opposes 
Dal  las's  plan,  11,15;  character  of,  70; 
makes  reforms  in  bank  management, 
71-80 ;  restricts  note  issues.  70, 75 ;  ef- 
fect of  measures  of,  on  bank's  business, 
80,81;  aims  of,  72;  as  a  banker,  72,82, 
83,  380-S3;  asks  Crawford  not  to  re- 
ceive branch  paper  in  payment  of  gov- 
ernment dues,75;  secures  new  arrange- 
ments for  transfers,  463,  464 ;  restrains 
state  banks,  77,78,  439,  440;  places  re- 
strictions on  branches,  76,  380, 381, 405. 
426;  attempts  to  reduce  number  or 
branches,  79;  issues  under,  81 ;  difficul- 
ties with  the  Georgia  state  banks,  84-9, 
382,  383 ;  pays  out  state-bank  notes,  97, 
439,  440;  resigns,  91, 92. 

CHILLICOTHE  AGENCY,  400. 

CHILLICOTHE  BRANCH  (see  Branches, 
western) :  established  in  1817, 23,  note  3 ; 
taxed,  65,89,  90;  discontinued  in  1825, 
398. 

CINCINNATI  AGENCY,  400. 

CINCINNATI  BANKS  (state),  51,  52,  62, 63. 

CINCINNATI  BRANCH  (see  Branches,  west- 
ern) :  established  in  1817,  23,  note  3: 
discounts  of,  in  June,  1818,  34;  capital 
of,  in  1819,  56;  taxed,  65,  89,  90;  with- 
drawn in  October,  1820,  79,  80,  398 ;  re- 
established in  1825,  398;  embarrass- 
ments at  in  1832, 151 ;  loose  business  of, 
in  1832,  155,  391,  413;  issues  of,  414; 
charges  against  officials  of,  neglected, 
391 ;  loans  of,  cease  in  1835,  366. 

CIRCULATION  OF  BANK  (see  Issues, 
Notes) :  in  March,  1817,  28;  in  1818,  30; 
reduction  in  1818-19,  53,  54;  under 
Cheves,  81, 96,  97 ;  under  Biddle,  96,  98, 
99,110,  115,  116,  133,  136;  reduction  of, 
in  1833-34,  324;  in  1835,  359,  265;  wide 
dispersion  of,  407 ;  inflation  of,  420,  423, 
424 ;  various  elements  of,  428 ;  propor- 
tion of,  to  specie  reserve,  431,  432. 

CLAY,  HENRY  :  speaker  of  the  house,  8 ; 
appoints  committee  favorable  to  a 
bank  in  1815, 18;  attitude  on  question 
of  application  for  re-charter  in  1830-32, 
215-17 ;  tactics  in  December,  1833, 335-8 ; 
opposes  Webster's  re-charter  bill  in 
1834,  338;  triumphs  over  Jackson,  345, 
346 ;  injures  the  bank's  cause,  346. 

CLAYTON,  AUGUSTIN-  S.,  138,  228, 229,  249, 
333. 

CLINTON,  DE  WITT,  65. 

COLT,  R.  L.,  94. 

COMMITTEES  OF  HOUSE,  Select:  to  in- 
quire into  expediency  of  establishing  a 
bank,  8;  to  consider  bill  embodying 
Calhoun's  plan  with  amendments,  13 ; 
to  reconsider  Dallas's  measure,  15 ;  to 
consider  Madison's  message,  18 ;  of  in- 
vestigation in  1818, 58, 138 ;  of  investiga- 
tion in  1832,  230;  or  investigation  in 
1834,  342.  Ways  and  Means :  supports 
bill  to  erect  bank  in  District,  8;  reports 
resolution  for  national  bank  with 
branches,  10 ;  refuses  to  report  favor- 
ably on  petition  of  bank,  117 ;  reports 
in  favor  of  bank  in  1830,  198 ;  reports 


INDEX 


531 


that  government  deposits  are  safe  in 
bank,  289;  resolutions  of,  in  1834,  334, 
341. 

COMMITTEES  OF  THE  SENATE,  Finance: 
supports  bank's  right  to  hold  govern- 
ment deposits  without  compensation, 
170;  in  1830,  198;  in  1834,  255,  264,265, 
335,  356,  358. 

COMPKOMISE  TARIFF,  298. 

CONGRESS  (see  Committees  of  House  and 
Senate,  House,  Senate) :  refuses  to  re- 
charter  bank  in  1811, 1 ;  fails  to  provide 
a  war  revenue,  1 ;  authorizes  bond 
issues  1812-14,  2;  authorizes  emission 
of  treasury  notes,  3;  increases  taxes,  4; 
passes  bank  bill,  21 ;  joint  resolution  of 
April  30,  1816,  23;  creates  bank  com- 
missioner of  loans  and  pension  agent, 
305 ;  supports  bank  in  1819,  58-60 ;  re- 
fuses to  modify  bank  charter,  75 ;  re- 
fuses to  allow  additional  signers  of 
notes,  91, 116,  117;  application  for  re- 
charter  in,  224 ;  position  of  parties  in, 
in  1833,  332-4;  bank's  memorial  to, 
for  restoration  of  the  deposits,  335; 
memorials  to,  1834,  335,  354;  adjourns 
in  1834  without  taking  action,  347 ;  em- 
powers Woodbury  to  settle  with  the 
bank,  1836,  373,  375. 

CONGRESSMEN  :  208,  252-5. 

CONNECTICUT:  attempts  to  tax  bank 
stock,  165. 

CONSTITUTIONALITY  OF  THE  BANK,  7,  9, 
12, 16, 19, 164, 184, 198,  202,  205,  333,  334. 

CONTINGENT  FUND  UNDER  BIDDLE,  133. 

"CONTINGENT  DRAFTS,"  302-5. 

CONTRACTION  (see  Curtailment,  Panic, 
Stringency). 

COOPER,  THOMAS,  273,  333,  334,  442,  443. 

CORRUPTION  AT  BANK  :  no  evidence  of, 
243,  252,  255. 

COURIER  AND  ENQUIRER,  180,  256,  258, 
259,  263,  264. 

CRAWFORD,  WILLIAM  H. :  secretary  of 
the  treasury,  23 ;  circular  to  state 
banks,  23;  sanctions  agreement  be- 
tween bank  and  state  banks  regarding 
resumption,  25;  objects  to  bank's 
charging  premium  on  exchange,  138; 
receives  state-bank  notes  in  payments 
to  government,  454,  455;  holds  bank  re- 
sponsible for  safety  of  public  funds  in 
state  banks,  460;  refuses  Cheves's  re- 
quest not  to  receive  branch  paper  in 
payment  of  government  dues,  75. 

CRSCKETT,  DAVID,  254. 

CROWNINSHIELD,  B.  W.,  245. 

CURRENCY  :  state  of,  5, 29Ji8,  37, 421,  443-6; 
improvement  under  Biddle,  99,  443, 
444;  lack  of,  in  1832, 151, 152;  amount  of, 
in  circulation,  444 ;  methods  of  improv- 
ing suggested,  450. 

CURTAILMENT  :  in  1818-19,  51-4,  57 ;  fail- 
ure of,  in  1819,  54-8;  effect  on  the 
country  in  1819, 61-3 ;  continued,  in  1819^ 
20,  71;  ordered  in  1831,  146,  147,  162; 
failure  of,  in  1831-32,  147-51 ;  responsi- 


bility for.  in  1833-34,  298,  299;  bank 
justified  in,  in  1833,  314,  315;  of  dis- 
counts in  1833-34,  316,  319-22;  restric- 
tions on  bills  of  exchange  in  1833-34, 
317, 319-22 ;  amount  and  distribution  of, 
in  1833-34,  321,  322;  effect  on  circula- 
tion, deposits,  and  supply  of  specie,  in 
1834, 324,  325 ;  effect  on  public  opinion 
in  1834,  348,  349,  351 ;  bank  strengthened 
by,  in  1834,  325, 326 ;  suffering  occasioned 
by,  in  1834,  326-8 ;  purpose  of  the  bank 
in,  328-31,  339;  relieved  by  the  bank, 
March,  1834,  344 ;  end  of,  1834,  347,  348. 

DALLAS,  ALEXANDER  J. :  appointed  sec- 
retary of  treasury,  9 ;  cannot  pajr  in- 
terest on  national  debt,  6;  believes 
national  bank  only  remedy  for  dis- 
ordered finances,  10 ;  plan  for  bank,  10, 
14, 15, 17 ;  annihilates  Calhoun's  plan, 
13 ;  final  plan  in  1815, 18 ;  favors  Jones 
for  president  of  bank,  22, 244 ;  proposes 
resumption  to  state  banks,  23. 

DALLAS,  GEORGE  M.,  221, 223-5,  232. 

DEBT,  NATIONAL  (see  National  debt). 

DEMOCRACY,  167, 175, 248,  296. 

DEMOCRATS:  appointed  on  branch 
boards,  181,  182,  186, 189,  200,  245-7 ;  at- 
titude toward  bank,  175,  296,  351 ;  posi- 
tion in  1833,  332,  333 :  of  Pennsylvania, 
desert  the  bank  in  1834,  340. 

DEPOSITS:  amount  of,  compared  with 
circulation,  422,  428,  429 ;  elasticity  of, 
427. 

DEPOSITS,  GOVERNMENT:  arrangement 
concerning,  in  1817,  26;  "special,"  455- 
57;  resolutions  concerning,  170;  early 
attempts  to  remove,  177,  202,  206;  re- 
moval of,  287-97,  335;  accounts  of  bank 
with  treasury  concerning,  457-60; 
amount  of,  held  by  bank,  465 :  difficulty 
of  securing  promptly  from  bank,  473, 
474 ;  safety  of,  in  bank,  458,  464,  465. 

DEPOSITS,  PRIVATE,  99,  111,  134, 136,  324. 

DESHA,  JOSEPH,  165. 

DICKINS,  ASBURY,  178, 179,  254,  255,  268. 

DISCOUNTS  (see  Loans  and  discounts). 

DIVIDENDS  OF  BANK  (see  Appendix  V) : 
semi-annual,  of  4  per  cent.,  January, 
1818,  29;  foreign,  payable  in  London, 
41 :  payment  to  delinquent  stock- 
holders, 58,  59:  not  to  be  paid  until 
original  capital  intact,  72;  of  V/2  per 
cent,  declared  July,  1821,  80 ;  stock- 
holders dissatisfied  with  smallness  of, 
109 ;  under  Biddle,  111. 

DOMESTIC  EXCHANGE  (see  Exchange, 
inland). 

DRAFTS:  of  the  bank,  74,  76,  141-3;  "on 
the  bank,  given  by  Taney  to  state 
banks,  302-5. 

DRAFTS,  BRANCH  (see  Branch  drafts). 

DUANE,  WILLIAM  J.,  292-4,  296,  300. 

ELECTIONS  (see  Charges  against  the 
bank):  in  1832,  241,  242,  285;  in  1834, 
spring,  345 ;  in  1834,  congressional,  355, 
356. 

EPPES,  JOHN  W.,  7,  8, 10. 


532  THE  SECOND  BANK  OP  THE  UNITED  STATES 


EWINQ,  THOMAS,  237,  350. 

EXCHANGE.  COMMITTEE  OF,  259,  262,  273, 
279-84. 

EXCHANGE,  FOREIGN,  111,  112. 

EXCHANGE,  INLAND  :  restrictions  regard- 
ing bills  of,  76 ;  operations  at  New  Or- 
leans put  on  safer  footing,  96 :  dealings 
in  early  years,  140;  under  Biddle,  98, 
112, 133, 136, 140-44, 147, 157,  406;  equali- 
zation of,  meaning  of  term,  137 ;  slight 
dealings  in,  by  banks,  138;  used  as 
device  to  evade  usury  laws,  138-40; 
"race-horse"  bills,  32, 158, 159 ;  bank's 
advantages  in  securing,  140, 141 ;  rates 
of,  141,  142,  315,  317,  319,  320;  dur- 
ing contraction  of  1833-34,  314-17,  319- 
22;  in  1835,  360,  362,  370;  part  of  the 
circulation,  428 ;  use  of,  in  transfer  of 
government  funds,  467. 

FAYETTEVILLE  :  branch  established,  30, 
note  1,  379 ;  taxed,  64,  65,  deficiency  in 
cashier's  accounts,  79 ;  closing  up,  366. 

FEDERALISTS:  oppose  Dallas's  plan,  11, 
14,  15;  approve  Calhoun's  plan,  12; 
support  Lowndes's  attack  on  Calhoun's 
plan,  13 ;  oppose  final  plan,  18 ;  share 
in  first  directorate  of  the  bank,  22. 

FINANCES,  state  of  during  war  of  1812, 
1-7. 

FISHER,  JAMES  C. :  president  pro  tempore 
of  the  bank,  60. 

FISK,  JONATHAN,  8, 10, 12, 13. 

FORSYTE,  JOHN  :  approves  Dallas's  plan, 
12;  member  of  Select  Committee,  13; 
first  points  out  possibility  of  issuing 
branch  drafts,  117 ;  borrows  large  sum 
from  bank,  253;  opposes  bank  in  1834, 
335. 

FRENCH  INDEMNITY  BILL,  299-302,  374. 

FUNDED  DEBT  UNDER  BIDDLK,  110,  133, 
134. 

GALES  AND  SEATON,  256,  257. 

GALLATIN,  ALBERT:  resigns  from  the 
Treasury,  1 ;  on  bank's  dealings  in  ex- 
change, 138;  treatise  on  bank,  199,  200, 
205:  oelieves  in  bank's  integrity  in 
matter  of  3  per  cents.,  273;  opposes 
removal  of  deposits,  291:  chairman 
union  committee  in  1834,  343;  on  rela- 
tion of  bank  to  state  banks,  435,  445, 
451. 

GASTON,  WILLIAM,  13, 14. 

GEORGIA  :  state  banks  of,  84-9,  440. 

GILPIN,  HENRY  D.,  308. 

GIRARD,  STEPHEN,  22, 145,  432,  433. 

GIRARD  BANK,  302-4,  432,  433. 

GLOBE,  199,  256,  285,  286,  327,  353. 

GLOBE,  extra,  355. 

GOUGE,  WILLIAM  M.,  61,  433,  466. 

GOVERNMENT  (see  Deposits,  Government, 
Relations  of  bank  to) :  war  stock  of,  to 
be  subscribed  to  bank,  10 ;  stock  held  by 
bank,  28, 134;  redeems  $13.000,000  of  na- 
tional debt  in  1817,28 ;  demands  $2,000,000 
of  its  deposits  in  specie,  57;  demands 
$6,000,000  in  1831  to  discharge  the  3  per 


cents.,  146;  pays  principal  of  French 
Indemnity  Bill,  300;  declines  to  receive 
state  bank  notes  not  approved  by  bank, 
436,  437 ;  connection  with  state  banks, 
454,460-62. 

GOVERNMENT  DIRECTORS,  291,  308-10. 

GOVERNMENT:  relations  of,  with  the 
bank,  reasons  for  government  connec- 
tion, 19;  charter  provisions  concerning, 
20,  453;  stock  subscribed  to  bank,  470; 
advantages  of  connection  in  early 
years,  27,  28,  453-60;  loans  of  bank  to 
government,  28,  73,  454,  471 ;  bank,  com- 
missioner of  loans  ana  pension  agent, 
305;  arrangement  of  1820  regarding 
state  bank  notes,  455,  456;  accounts 
with  the  trftasury,  457-9, 463. 464 ;  gov- 
ernment liquidates  stock  note  of 
$7,000,000  in  1831, 134;  stock  in  bank  re- 
deemed by  bank,  372-5;  usefulness  of 
bank's  notes  to  government,  453,  454 ; 
transfer  of  government  funds,  76,  77, 
462-8;  safety  of  government  funds,  458, 
464, 465 ;  government's  means  of  control, 
465 ;  disbursements  made  by  bank,  468, 
469:  profit  to  government  from  con- 
nection, 467,  469,  471,  474;  profit  to  bank 
from  connection,  475,  476;  losses  to 
bank,  469,  470;  disadvantages  to  bank, 
74,  75,  310-12;  government  account 
overdrawn,  471 ;  difficulty  of  securing 
prompt  payment  of  government  de- 
posits, 473,  474;  probable  benefit  of 
bank  to  government  today,  474-6. 

GREEN,  DUFF,  199,  256,  267. 

GRUNDY,  FELIX,  8. 

HAMILTON,  ALEXANDER,  JR.,  194,  345. 

HAMILTON,  JAMES  A.,  183, 196, 213, 288, 291. 

HARDING,  JESPER,  256. 

HARTFORD  BRANCH  (see  branches,  east- 
ern), established  In  1824,  398;  losses  at, 
388 ;  closed  June,  1835,  366. 

HAYNE,  ROBERT  Y.,  250,  447. 

HILL,  ISAAC,  171-5, 177. 

HOUSE  OF  REPRESENTATIVES  (see  Bank 
bills,  Committees  of  House,  Congress) : 
initiates  bank  legislation,  7,  8, 10, 12, 15, 
18;  Dallas  bill  lost  in,  15;  debate  in, 
over  investigation  of  1818, 58-60 :  refuses 
to  pass  bills  modifying  charter,  116; 
rejects  motion  to  sell  government 
shares  in  bank,  169,  289;  rejects  reso- 
lutions against  constitutionality  of 
bank,  202;  passes  bill  to  re-charter, 
235 ;  declares  deposits  safe  in  bank  in 

1833,  289 ;  votes  of,  in  regard  to  bank  in 

1834,  334,  341 ;  supports  Jackson  in  pen- 
sion controversy,  306, 307 :  attacks  upou 
Jackson  in,  319,  350. 

INGERSOLL,  CHARLES  J. :  labors  in  behalf 
of  the  bank,  206,  225.  226,  251 ;  criticises 
policy  of  bank  publications,  266;  de- 
serts the  bank's  cause,  340;  feeling 
against,  in  Philadelphia  in  1834,  354, 
355. 

INGHAM,  SAMUEL  D. :  approves  Dallas's 
plan,  12;  member  of  select  committee 
to  select  Calhoun's  plan,  13;  complains 


INDEX 


633 


to  Biddle  of  Mason,  172 ;  disclaims  in- 
tention to  convert  bank  into  party  ma- 
chine, 173 ;  correspondence  with  Biddle 
172-9,  288;  objects  to  commission  for 
transferring  government  funds  abroad, 
178 ;  suggests  removal  of  deposits,  288. 

INVESTIGATION  OF  BANK  IN  1818-19 :  58- 
60 ;  of  Western  and  Southern  offices,  79 ; 
demanded  by  Clayton  in  1832,  229 :  re- 
port of  committee  of,  in  1832,  230 ;  by 
government  directors,  308;  attempt  by 
government  directors  thwarted,  310;  in 
1834,  thwarted  by  bank,  342 ;  in  1834,  by 
Senate  committee  on  finance,  356,  358. 

ISSUES  OF  THE  BANK  (see  Circulation, 
Notes)  :  legal  provisions  concerning, 
404 ;  under  Jones,  404,  405,  415 ;  under 
Cheves,  75,  81,  405;  under  Biddle,  147, 
405,  406, 407 ;  maximum  amount  of,  407 ; 
highest  annual  average  of,  407 ;  distri- 
bution of,  407-14;  convertibility  of ,  414, 
415,  418r21j429;  elasticity  of,  414,  422-6; 
depreciation  of,  415-18;  importance 
of,  compared  with  deposits,  422,  428, 
429;  soundness  of,  421,  422;  credit  of, 
467 ;  means  of  redemption  of,  424,  425 ; 
fluctuations  of,  425,  426;  principal  de- 
fect of,  429 ;  remedies  for  defect  of,  429. 

JACKSON,  ANDEEW  :  origin  of  hostility  to 
bank,  182-85 ;  recommends  officers  for 
Nashville  branch  about  1818, 183 :  op- 
poses repeal  of  Tennessee  law  taxing 
branches.  183;  dissuaded  from  attack- 
ing bank  in  first  inaugural,  183,  184; 
suspects  complicity  of  branches  in 
politics,  172, 184 ;  effect  of  Portsmouth 
affair  upon,  179, 180, 195 ;  believes  bank 
unconstitutional,  184,  192,  194, 195 :  ob- 
jects to  bank  as  a  monopoly  and  un- 
democratic, 195 ;  thinks  bank  should  be 
unpartisan,  187;  believes  charges 
against  New  Orleans  branch  unfound- 
ed, 188;  friendly  relations  with  Bid- 
die,  188,  190;  letter  to  Biddle,  191, 
192;  interview  with  Biddle,  192,  193; 
suspects  Biddle,  193 ;  "  pledged  against 
the  bank,"  193;  message  of,  in  1829, 194, 
195;  idea  of  bank,  196-8,  203,  226;  re- 
sents McDuffio's  interpretation  of  his 
bank  p_lan,  199;  censures  Duff  Green, 
199 ;  objects  to  holding  of  bank  stock 
by  foreigners,  201,  202;  message  of,  in 
1830,  203;  angered  by  newspaper  criti- 
cism, 204;  willing  to  assent  to  old  bank 
with  modified  charter,  203,  208-13; 
modifications  of  charter  required  by, 
211, 212,225,226,  and  note  4 ;  message  of,  in 
1831,212,213;  will  not  give  assurances 
of  approving  a  modified  charter,  218; 
offended  by  application  for  re-charter 
in  1832,  223;  connection  of  with  Clay- 
ton's resolution,  228,  229;  effect  upon, 
of  investigation  of  1832,  231,  232 ;  veto 
mess_age  of,  231,  239-41;  re-elected 
president,  242;  justification  of  his  atti- 
tude toward  bank  after  1832,  242 ;  com- 
Elains  of  printing  expenditures  of 
ank,  265 ;  determined  on  annihilation 
of  bank,  286 ;  message  of  1832,  286 ;  be- 
lieves the  bank  guilty  of  bribery,  287 ; 
removal  of  deposits  and,  287,  297  ;  gov- 
ernment directors  and,  291,  308-10; 


"  paper  "  of,  on  removal  of  deposits, 
293,  296,  297 ;  and  Duane,  292-4 ;  pen- 
sion funds  and,  303 ;  threatens  to  pro- 
hibit government  receipt  of  branch 
drafts,  312;  holds  bank  responsible  for 
panic  of  1833-34,  328;  receives  anony- 
mous letters,  353 ;  censure  of,  by  Senate, 
335,345.  346;  public  feeling  against  in 
1834.  349,  350,  352;  raves  against  the 
bank,  351,  352;  message  of,  in  1834,  358, 
372;  message  of,  in  1835,  373;  message 
of,  m  1836, 374 ;  offense  of,  in  destroying 
bank,  476. 

JAUDON,  SAMUEL:  cashier  of  New  Or- 
leans branch,  157, 393;  interview  of,  with 
Jackson,  188;  cashier  at  Philadelphia, 
393 ;  ignorant  of  methods  at  New  York 
office,  395 ;  remonstrates  against  use  of 
"transfer"  drafts,  305;  upholds  con- 
traction of  1833-34,289,329;  willing  to 
relax,  July,  1834, 348. 

JOHNSON,  R.  M.,  171,  254. 

JONES,  WILLIAM  :  resigns  from  treasury, 
1 ;  elected  president  of  bank,  22 ;  mis- 
taken conception  of  bank's  manage- 
ment, 30,  380;  administration  of 
branches  by,  379.  380,  v!5;  system  of 
banking.  30, 33;  complicity  of,  in  stock 
frauds,  40,  41,  47;  resigns  presidency  of 
bank,  48,  60,  78. 

KENDALL,  AMOS:  charges  complicity  of 
branches  in  politics,  171 ;  believes  in  a 
"just  equilibrium"  in  bank  director- 
ates, 175 ;  furnishes  Webb  with  queries 
relating  to  bank,  180,  181;  removal  of 
deposits  and,  292,  293,  295. 

KENTUCKY  BANKS  (state),  63. 

KENTUCKY  BRANCHES  (see  Branches, 
western ;  Lexington,  Louisville) :  taxed, 
65 :  politics  at,  248,  382 ;  alleged  politi- 
cal action  of,  171,  248-51 ;  charges  re- 
butted, 172, 187, 188. 

KINO,  JAMES  G.,  343. 

KING,  JOHN  P.,  333,  337. 

KING,  RUFUS,  20, 41. 

KITCHEN  CABINET,  193. 

LEGISLATION  OF  STATES  CONCERNING 
BANKS,  64,  65,  88-90, 165,  206,  224,  235. 

LENOX,  ROBERT,  94,  253,  296,  394. 

LEWIS,  WILLIAM:  believes  in  a  "just  -' 
equilibrium  "  in  bank  directorates,  175, 
247;  correspondence  of,  with  Biddle, 
182,  184,  186-9,  191,  200,  246,  247;  ad- 
vises in  1831  against  application  for 
re-charter,  219;  names  members  of 
Nashville  and  Lexington  boards,  246, 
247  ;  wishes  to  place  Democratic  mem- 
bers on  Louisville  board,  247. 

LEXINGTON  BRANCH  (see  Branches,  west- 
ern ;  Kentucky  branches) :  established 
in  1817,  23,  note  3;  discounts  of,  in  1818, 
34;  Democratic  politicians  appointed 
directors  at,  246;  capital  of,  in  1819,  56 ; 
charges  against,  171 ;  exchange  deal- 
ings of,  143;  cashier  of,  urges  loans  to 
help  Clay  candidate,  251 ;  run  on,  in 
1832,  299;  disobeys  instructions,  388; 
closed  1825,  366. 


634  THE  SECOND  BANK  OP  THE  UNITED  STATES 


LIVINGSTON,  EDWABD  :  asked  by  Biddle 
to  see  Jackson  concerning  re-charter, 
201 ;  secretary  cf  state,  207 ;  acts  with 
Biddle  and  McLane  to  secure  assent  of 
Jackson  for  re-charter,  208-10;  thinks 
Jackson  will  consent  to  re-charter,  209; 
attempts  to  secure  Jackson's  assent  in 
1832,  2i5,  226 ;  on  investigation  of  1832, 
229;  interview  with  Biddle,  232;  on 
Jackson's  veto  232. 

LLOYD,  JAMES,  94. 

LOANS,  administration  wishes  to  secure, 
by  creating  a  bank,  11. 

LOANS  AND  DISCOUNTS  OF  THE  BANK  in 

1817.  28,  29:  rapid  increase  of  in  1818, 
30;  large  loans  to  individuals,  33;  on 
stock,  40,  41 ;  reduction  of,  in  1818-19, 
53;  under  Cheves,  81,  133;  under  Bid- 
die,  98,  99,  133,  136;  nature  of  paper 
discounted  under  Biddle,  99, 100;  nat- 
ure of  Western,  1524,  158,  159;  to 
Webb  and  Noah,  259-63;  to  Congress- 
men, 253-55;  for  long  terms  and  on 
mortgages,  253,  254 ;  in  1833-34,  316,  319- 
322 ;  in  1835,  359,  363 ;  loans  to  the  gov- 
ernment, 73,  454,  471;  made  by  the 
Exchange  Committee,  279,  280;  on 
"other  security"  in  1835,  362,  363,  370; 
proportion  of,  to  capital,  432. 

LOANS  OF  GOVERNMENT,  1812-14,  2,  3. 

LONDON  AGENCY,  42. 

LOSSES  OF  THE  BANE  AT  THE  BRANCHES 
IN  EARLY  YEARS  :  32,  65,  66,  67 ;  at  Hart- 
ford, 388;  at  Portsmouth,  387,388,394, 
395,  469;  at  the  branches  in  1835  and 
1836,  161;  total,  396;  as  government 
agent,  469,  470. 

LOUISVILLE  BRANCH  (see  Branches, 
western ;  Kentucky  branches) :  estab- 
lished in  1817,  30,  note  1 ;  capital  of,  in 
1819,  56;  reforms  at,  in  1819,  79:  over- 
trading at,  in  1832, 153, 154,  413 ;  charges 
against,  171 ;  state  of,  in  1834,  160,  326, 
394 ;  disobeys  instructions,  388 ;  impor- 
tance of,  398;  ceases  making  new 
loans  March,  1835,  366,  368. 

LOWNDES,  WILLIAM  J. :  member  of  com- 
mittee on  expediency  of  bank,  8; 
objects  to  Calnoun's  plan,  13;  chair- 
man of  select  committee  to  consider 
Calnoun's  plan,  13;  reports  back  to 
House  Calnoun's  plan  with  amend- 
ments unchanged,  13,  14;  moves  to 
reduce  capital  to  $35,000,000, 13 ;  votes 
for  Dallas  measure,  15 ;  moves  indef- 
inite postponement  of  bill,  17 ;  pro- 
poses bank  after  war  of  1812, 17. 

LUDLOW,  T.  W.,  270. 

McCuLLOCH,  JAMES  W. :  cashier  of  Bal- 
timore branch,  42;  speculates  in  stock, 
43,  44;  fraudulent  transactions,  45-50; 
removed,  49,  78;  tried  for  conspiracy, 
79. 

MCCULLOCH  vs.  MARYLAND,  65. 

McDuFFiE,  GEORGE:  report  of,  on  the 
Bank,  198,  205,  442;  advises  application 
for  re-charter,  220;  chosen  to  present 
memorial  for  re-charter,  223;  allows 
investigation  of  1832  under  unfavor- 


able conditions,  229;  interview  with 
Biddle,  233;  loan  to,  254;  protests 
against  action  of  Charleston  branch, 
447 ;  supports  bank  in  1834,  333,  334,  349, 
354. 

MclLVAiNE,  WILLIAM:  cashier  bank, 
1826-1832,  105:  on  signing  notes,  116, 
117 ;  on  New  Orleans  bill  business,  162, 
393 ;  on  board  meetings,  279. 

McKiM,  JR.,  JOHN,  94, 244. 

McLANE,  Louis:  secretary  of  treasury, 
207 ;  acts  with  Biddle  and  Livingston 
to  secure  assent  of  Jackson  to  re-char- 
ter, 208-10 j  report  of,  creates  sensation, 
212 ;  positive  that  Jackson  will  refuse 
re-charter  in  1832,  219;  confers  with 
McDuffie  and  Smith  concerning  re- 
charter,  220;  argues  against  applica- 
tion for  re-charter,  222;  offended  by 
Biddle's  decision  to  apply  for  re-char- 
ter, 223;  joins  with  Livingston  to 
secure  modified  bill  in  1832,  225,  226; 
interview  with  Biddle,  232;  suggests 
inquiry  into  bank's  security,  286;  ap- 
points Toland  to  examine  affairs  of 
bank,  289:  opposes  removal  of  depos- 
its, 292;  becomes  secretary  of  state, 
292. 

MCLEAN,  JOHN,  171, 175. 

MACON  AGENCY,  400, 

MADISON,  JAMES:  vetoes  bill  of  1815,16; 
suggests  a  bank  in  his  annual  mes- 
sage, 1815,  17:  signs  bill,  21;  names 
government  directors,  22,  242;  favors 
Jones  for  president  of  bank,  21,  244; 
letters  of,  1831,  205. 

MANAGEMENT  OF  THE  BANK  (See  Biddle, 
Board,  Parent,  Cheves,  Jones). 

MANGUM,  WILLIE,  233. 

MARCY,  WILLIAM  L.,  341,  344. 

MARYLAND,  MCCULLOCH,  vs.,  65:  Union 
Bank  of,  302,  303. 

MASON,  JEREMIAH,  20, 172-4, 176, 178. 

MEMORANDUM,  BIDDLE'S,  of  interview 
with  McLane,  209,  note  2. 

MIDDLETOWN  BRANCH  (See  Branches, 
eastern) :  established  in  1817,  23,  note  3, 
379 ;  reductions  at,  52 ;  cashier  of,  sued 
for  defalcation,  79;  depreciation  of 
notes  of,  416;  transferred  to  Hartford, 
398. 

MISSOURI,  BANK  OF,  83;  currency  of,  442. 

MOBILE  BRANCH  (see  branches,  south- 
eastern): established,  384,  note  3,  444; 
exchange  dealings  of,  143;  cannot  re- 
duce, 1831-32,  150;  receipt  of  branch 
notes  at,  310,  311 ;  issues  of,  411 ;  depre- 
ciation of  notes  of  other  branches  at, 
417 ;  sold,  367,  note  1,  368. 

MONROE,  JAMES,  93,  205. 

NASHVILLE  BRANCH  (see  Branches, 
western) :  established  in  1827,  384,  note 
4;  exchange  dealings  of ,  143 ;  overtrad- 
ing at,  in  1832, 150,  155-7 ;  embarrass- 
ments of,  in  1832,  151, 152 ;  loose  meth- 
ods of,  in  1832,  391-3,  413;  ordered  to 
cease  purchasing  bills,  162;  Democratic 


INDEX 


535 


politicians  appointed  directors  at,  246 ; 
cashier  of,  a  local  appointee,  392 ;  im- 
portance of,  398 ;  issues  of,  413 ;  closed, 
366,367. 

NATCHEZ  BKANCH  (see  Branches,  south- 
western) :  established,  384,  note  3 :  ex- 
change dealings  of.  143 ;  cannot  reduce, 
150,  326;  issues  of,  411 ;  closed,  366,  note 
9,368. 

NATIONAL  DEBT  :  Biddle's  plans  for  dis- 
charging, 189-92;  payments  on,  in 
1832,  268,  269;  effects  of  payments  on, 
upon  note  elasticity,  423;  disburse- 
ments of  funds  by  bank  in  payment  of, 
469. 

NATIONAL  REPUBLICANS  :  urge  applica- 
tion for  re-charter,  213, 214 ;  place  bank 
in  platform  in  1831,  215,  216 ;  bound  to 
support  bank,  218 ;  believe  application 
for  re-charter  will  defeat  Jackson,  222 ; 
insist  on  pushing  bank  bill.  231 ;  posi- 
tion of,  in  1833,  332,  333. 

NEW  HAMPSHIRE  LEGISLATURE,  172,  206. 

NEW  ORLEANS  BRANCH  (see  Branches, 
western) :  established  in  1816,  23 ; 
charges  against,  171,  249,  250;  charges 
against  repelled,  188 ;  Democratic  pol- 
iticians appointed  directors  at,  246; 
exchange  operations  at,  96,  143,  144, 
162 ;  overtrading  at,  in  1832, 150, 157-9, 
393,  413 ;  issues  of,  411 ;  importance  of, 
397,  399;  closed,  366,  368. 

NEW  YORK  BANKS,  24, 25, 166,  302,  304. 

NEW  YORK  BRANCH  :  established  in  1816, 
23;  discounts  at,  in  1818,34:  reduction 
of  discounts  at,  in  1819,  55 ;  in  1832, 150; 
capital  of  in  1819,  56 ;  change  of  policy 
at,  95_,  99,  100 ;  Democratic  politicians 
appointed  directors  at,  246 ;  attempt  to 
remove  pension  funds  from,  206,  306; 
depreciation  of  notes  of  other  branches 
at,  417 ;  receipt  of  branch  notes  at,  310, 
312 ;  lax  management  of,  394 ;  loans  in 
1835,364,  365;  importance  of,  397  Clos- 
ing up,  367,  368. 

NEW  YORK  LEGISLATURE,  65,  206,  260. 

NICHOL,  JOSIAH,  201,  202. 

NILES,  HEZEKIAH,  61,  230,  326,  327,  339. 

NOAH,  M.  M.,  256,  263. 

NORFOLK  BRANCH  (see  Branches,  south- 
ern) :  established  in  1817, 23,  note  3 ;  cur-' 
tailment  called  for  at,  51;  losses  at, 
1819,  66;  charges  of  political  activity, 
249,250;  charges  against,  investigated, 
389,  390 ;  closed,  367.  note  1. 

NORTH  CAROLINA,  STATE  BANKS  OF,  63, 
64,  83,  441,  442,  444. 

NOTES  OF  THE  BANK  AND  BRANCHES  (see 

Circulation,  Issues) :  receivability  of 
under  Jones,  33,  34.  404,  415 ;  receipt  of, 
forbidden  except  by  branch  issuing, 
54;  embarrassments  caused  by  gov- 
ernment receipt  of,-  74,  75;  issues  of 
certain  offices  prohibited,  15,  404,  405, 
415,  455:  western  offices  to  issue  only 
five  dollar,  75 ;  of  five  dollars  received 
indiscriminately,  81,  405,  415,  417,  418; 
inability  of  president  and  cashier  to 


sign  sufficient,  98,  115;  not  issued  by 
Savannah  branch,  1819-24,  84;  few 
small  in  circulation,  115,  116;  restric- 
tions on  receipt  of,  at  Atlantic  offices, 
removed,  311,  312;  furnished  by  the 
parent  board,  379;  good  repute  of,  407; 
uncurrent,  311,  417;  not  universally 
received,  415-17,  437;  Biddle's  asser- 
tions concerning,  417,  418;  at  par,  418, 
419;  varying  demand  for,  425,  426;  use- 
fulness to  government  of,  453,  454 ;  is- 
sued by  Bank  of  the  United  States  of 
Pennsylvania,  372. 

NOTES  OF  STATE  BANKS,  4,  5,  37,  38,  97, 
435-40,  454,  457. 

NULLIFIERS  support  bank  in  1834,  333. 

OFFICES.  (See  Branches.) 

OHIO,  STATE  BANKS  OF  :  27,  51, 62,  63 ;  leg- 
islation against  bank,  65. 

OLIVER,  ROBERT,  94. 

OSBORN  vs.  BANK  OF  THE  UNITED 
STATES,  65, 89-91. 

PANIC  (see  Curtailment,  Stringency) :  of 
1818-19,  37,  47,  61-4 ;  prevented  in  1825, 
106-8,  449  450;  of  1833-34,  297, 299,  326-9, 
341;  bank's  methods  of  meeting,  449, 
450. 

PARENT  BOARD  (See  Board,  parent.) 

PARTON,  JAMES,  182,  256. 

PATTERSON,  ROBERT,  94,  238,  239. 

PENNSYLVANIA:  importance  of,  in  elec- 
tion of  1832,  222,  223:  deserts  the  bank 
in  1834,339,340;  legislature  of,  65,206, 
224, 235,  340 ;  state  banks  of,  24, 25,  27, 63. 

PENSIONS  AND  PENSION  FUNDS,  176,  206, 
306-8,  469. 

"  PET  BANKS,"  302,  311. 

PEYTON,  BALIE,  350. 

PHILADELPHIA  OFFICE  (see  Board,  par- 
ent) :  curtailment  of  discounts  at,  51, 
54, 150;  closing  up,  367. 

PITTSBURG  BRANCH  (see  Branches,  west- 
ern) :  established  in  1817, 23,  note  3;  dis- 
obedience of  cashier  of,  388 ;  overtrad- 
ing at,  in  1832,  154;  character  of  ex- 
change business  at,  162, 163 ;  sold,  367, 
note  1. 

PLANTERS'  BANK  OF  GEORGIA,  84-9. 

POINDEXTER,  GEORGE,  350. 

POLK,  JAMES  K.,  341,  465,  466. 

PORTER,  ALEXANDER,  158, 159. 

PORTLAND  BRANCH  (see  Branches,  east- 
ern) :  established,  384,  note  5;  misman- 
agement at,  388,  389;  closed,  367,  note  1, 

PORTSMOUTH  BRANCH  (see  Branches, 
eastern) :  established  in  1817, 379 ;  losses 
and  frauds  at,  387,  388,  394,  395,  469;  de- 
preciation of  notes  of,  416;  Mason's 
management  of,  176;  complaints 
against,  171-7,  249,  250;  attempted  re- 
moval of  pension  funds  from,  177,  306 ; 
Biddle  investigates,  178;  Democratic 
politicians  appointed  on  board  at,  246 
closed  in  June,  1835,  366. 

POTTER,  JOHN,  94. 


536  THE  SECOND  BANK  OF  THE  UNITED  STATES 


PRESIDENT  OF  BANK  (see  Bevan,  Biddle, 
Cheves,  Fisher,  Jones) :  position  of,  un- 
der rules  of  1833,  274. 

PRESS  :  relations  of  bank  with,  256,  267. 

PRESTON,  WILLIAM  C.,  333. 

PROVIDENCE  BRANCH  (see  Branches, 
eastern) :  established  in  1817,  23,  note  3; 
closed,  367,  note  1. 

PROXIES,  274. 

RACE-HORSE  BILLS,  32, 138, 159. 

RANDOLPH,  JOHN,  18. 

REAL  ESTATE  OF  BANK  :  holdings  of,  in 
Ohio,  67;  loans  on,  forbidden,  100;  as- 
sistant cashier  appointed  to  take 
charge  of,  104;  sale  of,  369,  400. 

RE-CHARTER  OF  BANK  (see  Bank  bills, 
Bank  of  the  United  States,  Biddle, 
Charter,  Jackson). 

REDUCTION  (see  Curtailment). 

RELIEF  SYSTEM,  83,  89, 165. 

REMOVAL  OF  THE  DEPOSITS,  287-97,  335. 

RENEWALS,  32,  33,  45,  46,  54,  57,  370. 

REPORTS  (see  Committees  of  House  and 
Senate,  Investigation). 

REPUBLICAN  PARTY  :  responsible  for  ex- 
istence of  bank,  1, 20, 21 ;  for  and  against 
Dallas'*  plan,  11, 12 ;  share  in  direction 
of  bank  when  organized,  22. 

RESOLUTIONS  (see  Committees  of  House 
and  Senate,  Congress,  House,  Senate, 
and  the  separate  states). 

RICHMOND  BRANCH  (see  branches,  south- 
ern) :  established  in  1817,  23,  note  3: 
curtailment  called  for,  51,  52;  capital 
of,  in  1819,  56;  deficit  at,  79;  president 
of,  resigns,  79;  ordered  to  cease  making 
new  loans,  March,  1835,  366. 

RITCHIE,  THOMAS,  256. 

ROBBINS,  ASHER,  350. 

RUSH,  RICHARD,  252, 355,  461. 

SAFETY  FUND  SYSTEM,  166. 

ST.  Louis  BRANCH  (see  Branches,  west- 
ern) :  established  in  1829,  384,  note  4, 
442;  ceases  making  new  loans  in  March, 
1835,366. 

SAVANNAH  BRANCH  (see  branches,  south- 
ern): established  in  1817,  23,  note  3; 
capital  of,  in  1819,  56 ;  taxed,  64 ;  losses 
at,  1819,  66 ;  trouble  with  Georgia  state 
banks,  84-9 ;  hostile  legislation  against, 
88;  tax  repealed,  89;  business  of,  sus- 
pended, 88, 382, 383 ;  reprehensible  prac- 
tices at,  382 :  cannot  reduce  in  1831-32, 
150 ;  demand  on,  for  specie  in  1833,  299 ; 
ordered  to  cease  making  new  loans, 
March,  1835,  366,  367. 

SENATE  (see  Committees  of,  Congress) : 
initiates  bank  legislation,  14,  17;  at- 
tempts to  amend  House  bill,  16 ;  sup- 
ports bank  after  investigation  of 
1818-19,  60;  passes  bills  modifying 
charter,  116;  resolution  concerning 
government  deposits  in,  170;  re- 
ruses  leave  to  introduce  Benton's 
resolution,  206;  bill  for  re-charter 


initiated  in,  233;  bill  passed  by,  235; 
fails  to  pass  bill  over  president's  veto, 
241 ;  supports  bank  in  pension  contro- 
versy, 306;  rejects  nomination  of  gov- 
ernment directors  and  of  Taney,  309; 
debate  in,  in  1833-34,  335;  censures 
Jackson,  335,  345,  346;  passes  resolu- 
tions to  restore  the  deposits,  346;  at- 
tacks upon,  in  1834,353,  354;  attacks  in, 
upon  Jackson  in,  349,  350. 

SERGEANT,  JOHN,  194,  217,  218.  251,  290, 
336. 

SMITH  AND  BUCHANAN,  42. 

SMITH,  DENNIS,  40,  43,  45-50. 

SMITH,  JONATHAN,  23, 47,  78. 

SMITH,  SAMUEL,  218-20,  254,  255. 

SOUTH  CABOLINA  :  state  banks  of,  63, 83, 
197,  447;  legislature,  65, 181;  taxes  bank 
165. 

SPECIAL  DEPOSITS,  445-47. 

SPECIE:  insufficient  supply  of,  held  by 
bank  in  1817,  28,  29,  34,  35 ;  premium  on, 
in  1817  and  1818,  37,  38;  imported  by 
bank,  37,  52,  56,  57 ;  efforts  to  secure,  in 
1818  and  1819,  56,  57,  69,  70;  holding  of, 
by  bank  under  Biddle,  111,  134,  136; 
movement  of,  130 ;  running  out  of  the 
country  in  1831-32,  145,  146;  effect  of 
contraction  of  1833-34,  on  supply  of, 
324:  in  1835,  359;  in  1836,  371;  difficulty 
in  demanding,  36 ;  leniency  in  demand- 
ing, 445 ;  difficulty  in  obtaining  on  de- 
mand, 419,  420,  447-49;  insufficient 
supply  of,  in  the  United  States,  420, 
421,  448,  449;  reserve  of.  by  state  banks, 
432 ;  effect  of  demand  for,  upon  note 
circulation,  438;  reserve  of,  by  the 
bank,  431,  432. 

SPECIE  PAYMENTS  :  suspended  in  1814,  4, 
9;  bank's  efforts  to  secure  resumption 
of,  in  1817,  23;  articles  of  agreement 
between  bank  and  state  banks  securing 
resumption  of,  25,  26,  454 ;  penalty  of 
bank  in  case  of  failure  to  pay  notes  in, 
38;  suspensions  of,  in  1819,  83;  failure 
of  resumption  of,  in  1819-22,  83;  bank 
the  only  guarantor  of,  430,  431. 

SPENCER,  JOHN  C.,  58. 

STATE  BANKS  (see  Notes  of  state  banks, 
and  separate  states) :  suspend  specie 
payments,  4;  make  temporary  loans  to 
government,  7 ;  unwilling  to  resume  in 
1816.  23,  24;  convention  of,  in  1817  with 
bank,  24;  approve  articles  of  agree- 
ment for  resumption,  25,  26,  454;  pro- 
posals to,  by  oank,  concerning 
transfer  of  government  deposits  'in, 
in  1817,  26,  27;  selected  by  bank  as 
treasury  agents,  457,  458;  abuse  priv- 
ileges as  government  depositories,  459, 
460;  difficulties  of,  with  bank,  27,  84-9, 
382,  383,  446,  447,  460;  depreciated  cur- 
rencies of,  33,  37,  38,  83,  327;  currencies 
of,  improved,  443,  444;  balances  of, 
with  bank,  35,  51,  57,  62,  63,  84-6,  97,  318, 
322,  324,  445,  446;  leniency  toward,  36, 
445,  446;  difficulty  in  restraining,  446, 
447;  mania  for  chartering,  in  1815-18, 
39;  in  1818-19,  62-4;  restrained  under 


INDEX 


537 


Cheves,  77,78,  439,  440;  opposition  of, 
to  bank,  89, 166,  446,  447,  460;  as  deposit 
banks,  302-5,  311;  attitude  of  bank 
toward,  in  1833-35.  318,  323,  324;  number 
of,  in  1830  and  1834,  364;  sale  of  branch 
assets  to.369 ;  issues  and  loans  of, 99, 
364,  421,  422 ;  keep  no  adequate  reserve, 
430;  proportion  of  circulation  of,  to 
specie  of,  432;  proportion  of  loans  of, 
to  capital  of,  432 ;  control  of,  by  bank, 
434-43,  451,  452;  restrain  bank,  438,  439; 
lack  of  unity  between  bank  and,  433, 
434,  450;  government  connection  with, 
457,  458,  461,  462;  advantages  of  bank 
over,  in  transferring  government  funds, 
467. 

STATE  LEGISLATURES:  Alabama,  165; 
Georgia,  64,  88,  89;  Kentucky,  65;  New 
Hampshire.  172,  206;  New  York,  65,  206; 
North  Carolina,  64,  65;  Ohio,  65;  Penn- 
sylvania, 65,  206,  224,  340 ;  South  Caro- 
lina, 65,  165,  181;  Tennessee,  64,  165; 
Virginia,  65;  attitude  of,  toward  re- 
charter,  206. 

STATE  EIGHTS  PARTY,  333,  334. 

STATES  (see  separate  states) :  opposed  to 
bank,  164-6,  446,  447 ;  attitude  of,  on  re- 
charter,  235;  note  issues  of  bank  in, 
408-12. 

STEVENSON,  ANDEEW,  229,  230. 

STOCK:  bank  subscriptions  to  capital, 
22;  falls,  60,  169,195,  295;  forfeited,  re- 
tained by  Cheves,  72;  sale  of,  forfeited, 
109;  motion  to  sell  government  shares 
of,  169 ;  government  shares  of,  paid  up, 
134;  government  shares  of,  redeemed, 
372,  375;  value  of,  in  1836,  373,  374, 

STOCKHOLDERS  OP  THE  BANK  :  first  elec- 
tion by,  22 ;  illegal  votes  by,  58,  59 ;  in 
Philadelphiat  38;  in  Baltimore,  39; 
dividends  paid  to  delinquent,  59 ;  de- 
mand larger  dividends,  109;  number 
of,  in  1831,  168;  will  not  attend  elec- 
tions. 274;  proxies  of,  274;  triennial 
meetings  of,  133,  208. 

STOCK  LOANS,  32,  33,  44-6,  48. 

STOCK  SPECULATION  IN  BALTIMORE  AND 
PHILADELPHIA,  38. 

STRINGENCY,  MONETAEY  (see  Curtail- 
ment, Panic) :  in  1818,  58;  in  1825, 106-8; 
in  1828, 110,  449,450;  in  1832, 151,  152;  in 
1833-34,  326-9,  344. 

SUMNEE,  WILLIAM  G. :  on  branch  drafts, 
125-7,  130;  on  constitutional  question 
in  1829, 164 ;  on  bank's  loans  to  brokers, 
274 

SURPLUS  FUND:  none  provided  under 
Cheves,  106;  efforts  of  Biddle  to  secure. 
106;  in  1823-28,  111;  in  1831, 133;  in  1836, 
371. 

SUSPENDED  DEBT  OF  THE  BANK:  assist- 
ant cashier  appointed  to  take  charge 
of,  104 ;  at  Cincinnati,  400 ;  under  Bid- 
die,  111,  133;  sale  of,  369,  370. 

TANEY,  ROGER  B. :  against  re-charter, 
219,  226 ;  and  French  Indemnity  Bill, 
300;  prepares  Jackson's  "paper"  on 
removal  of  deposits,  296;  appointed 


secretary  of  treasury,  295 ;  removes  the 
deposits,  295 ;  and  the  "transfer  drafts," 
302-5 ;  on  demands  for  specie,  438. 

TAXATION  OF  BRANCHES  BY  STATES,  64, 
65,  89,  90,  165. 

TAYLOE,  JOHN,  8. 

TENNESSEE:  legislates  against  bank  in 
1817,  64 ;  state  banks  of,  suspend  in  1819 
and  1821,  83;  law  against  bank  re- 
pealed, 1827, 165. 

THREE  PEE  CENTS.:  146,  151,  191,  269-73, 
286,  473. 

TOLAND,  HENRY,  289. 

TRADE  AND  INDUSTRY  :  in  1817-18,  27 ;  in 
1825,  106,  107;  in  1827,  109;  in  1825-31, 
135,  136;  in  1832,  152,  153;  in  1833-34, 
326-8;  in  1834,  363,  364. 

TEANSFERS  OF  GOVEENMENT  FUNDS,  76, 

77,  462-8. 

TREASURY  (see  Crawford,  Dallas,  Duane, 
Government.  Ingham,  McLane,  Rush, 
Taney,  Woodbury). 

TREASURY  NOTES,  3-6, 10, 12. 

TREASURY,  SECRETARY  OF:  authority 
over  bank,  465 ;  authority  over  depo- 
sits, 288. 

TRIALS    OF  OFFICERS  AND  DIEECTOES, 

78,  79. 

TYLER,  JOHN,  255,  267,  356. 

UTICA  BRANCH  (see  Branches,  eastern) : 
established,  384,  note  6;  Democratic 
politicians  appointed  on  board  at,  246; 
closed  in  June,  1835,  366. 

VAN  BUEEN,  MARTIN,  165,  204,  399. 

VEEPLANCK,  GULIAN  C.,  253,  273. 

VETOES  OF  BANK  BILLS,  16,  239. 

VIRGINIA  :  legislature  of,  65 ;  state  banks 
of,  24,  25,  27,  440. 

VON  HOLST,  H.  E.,  182. 

WALSH,  ROBERT,  256. 

WASHINGTON  BRANCH  (see  Branches, 
southern) :  established  in  1817,  23,  note 
3;  calls  for  balances  in  district,  51; 
losses  at,  66 ;  charges  against  cashier 
of,  389 ;  president  of,  248, 249, 389 ;  ceases 
making  new  loans,  March,  1835,  366. 

WATMOUGH,  JOHN,  230,  267. 

WEBB,  JAMES  WATSON  (see  Webb  and 
Noah) :  180, 181,  330,  345,  355. 

WEBB  AND  NOAH,  256-63. 

WEBSTER,  DANIEL  :  considers  establish- 
ment or  bank  necessary,  3;  opposes 
Dallas's  plan,  14 ;  plan  of,  for  bank,  15 ; 
opposes  final  plan,  18,  20 ;  joint  resolu- 
tion of,  April  30,  1816,  23;  acts  as  ad- 
visor of  bank  at  Boston,  94 ;  member  of 
central  board,  117,  118;  concurs  in 
Binney's  opinion  concerning  branch 
drafts,  118 ;  opinion  of  source  of  Jack- 
son's hostility  to  bank,  173;  friend  of 
Mason,  173,  174;  urges  loans  to  Gales 
and  Seaton,  257;  advises  application 
for  re-charter  in  1831,  218;  powerless  in 
matter  of  removal  of  deposits,  290; 
urges  bank  to  give  up  the  pension 


538  THE  SECOND  BANK  OP  THE  UNITED  STATES 


funds,  307,  306;  remonstrates  against 
opposition  to  individuals,  309 ;  on  con- 
traction of  1833-34  and  re-charter,  329- 
31 ;  report  by,  on  removal  of  deposits, 
335;  plan  for  re-charter  in  1834,  336-38; 
ceases  to  support  bank,  357,  358;  on 
state  of  the  currency,  421,  450. 

WEED,  THUELOW,  356,  357. 
WHIGS,  347,  356,  357. 
WHITE,  C.  P.,  245. 

WHITNEY,  E.  M.,  27S-77  and  note  5,  292, 
295. 

WILKINS,  WILLIAM,  307. 

WILLIAMS,  GEOEGE,  40,  43, 45-50,  78,  79. 

WILSON,  THOMAS,  105,  276. 


WIET,  WILLIAM,  118. 

WOLF.  SIMON,  Governor  of  Pennsylvania, 
889,340. 

WOODBUEY,  LEVI:  desires  Mason  re- 
moved, 172,  173;  believes  in  a  "just 
equilibrium"  for  bank  directorates, 
175 ;  supports  removal  of  deposits,  295 ; 
declines  to  pay  damages  on  French  in- 
demnity bill,  300;  censures  bank  for 
retaining  dividend,  301 ;  report  of  1834, 
308;  negotiates  redemption  of  govern- 
ment stock  by  bank,  372-75:  censures 
the  bank,  1836,  374 ;  prohibits  receipt 
of  branch  drafts,  452 ;  admits  safety  of 
bank  as  government  depository,  464; 
declares  government  transfers  profit- 
able to  bank,  466. 


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